A recent Bloomberg study found that Wells Fargo rejected more than half of its Black applicants applying to refinance mortgages in 2020. The bank approved 72% of white applicants applying to refinance a mortgage, but only approved 47% of Black applicants. The racial gap in approval persisted across income brackets; in fact, the study found that “Wells Fargo’s refinancing approval rates were higher for the lowest-income White applicants in 2020 than for all but the highest-income Black applicants.”
The wide racial gap in mortgage refinancing approvals at Wells Fargo stands in stark contrast to other financial lending institutions. Bloomberg found that JPMorgan Chase & Co. accepted 81% of Black applicants, compared to 90% of white applicants. Bank of America accepted 66% of Black applicants, compared to 78% of white applicants. Rocket Mortgage LLC accepted 79% of its Black applicants, compared to 86% of white applicants.
Discriminatory lending practices against African Americans remains a significant issue for Black homeowners and those who aspire to become homeowners. The Brookings Institution found that while the median white family held $171,000 in wealth in 2016, the median Black family held just $17,600. Put another way, for every dollar of wealth the average white household owned, the average Black household owned a dime, according to Brookings data in 2019.
Housing is a major contributor to this racial wealth gap, with Black Americans having a 46.4% homeownership rate, compared to White Americans’ 75.8% homeownership rate, according to Brookings. Though some racist lending practices have been outlawed – like the historic “redlining” of Black borrowers into segregated, under-resourced neighborhoods – discrimination against Black homeowners and homebuyers remains a persistent hindrance for Black families to sustain generational wealth.
The racial wealth gap has been exacerbated due to these lending issues. Because Black families are unable to get the financing they require, they are unable to invest in the stock market. Bloomberg reported in June 2022 that Black Americans have lost ground financially in the last few decades. Researchers said that unless there are interventions, the situation will get even worse.
Robert F. Smith’s Work Addressing Housing Discrimination
Robert F. Smith, the Founder, Chairman, and CEO of Vista Equity Partners, has long been an advocate for fair and equitable lending practices. Smith is a Co-Founder of the Southern Communities Initiative, a group of companies working “to tackle some of the most endemic problems facing communities of color” in Atlanta, GA, Memphis, TN, New Orleans, LA, Birmingham, AL, Houston, TX and Charlotte, NC. One focus area of the Southern Communities Initiative is housing; it provides “access to resources that enable home ownership at fair rates and terms.” By empowering the modernization and digitization of community development financial institutions (CDFIs) and minority depository institutions (MDIs) – commonly referred to as community lenders – the Southern Communities Initiative expands these lenders’ “capacity to issue more capital” for investments like home ownership and home refinancing.
Smith also champions The 2% Solution, a call for companies – including banks – to invest 2% of their profits to address systemic racism. Infusing this “reparative capital” into institutions in healthcare, education, housing, banking and technology has the ability to alleviate some of the inequities that Black communities continue to experience.
Learn more about The 2% Solution and the work that the Southern Communities Initiative does across the South.