HUD Probes Wells Fargo Over Race-Based Mortgage Programs

The Department of Housing and Urban Development has opened an investigation into Wells Fargo over a set of mortgage programs that HUD says may be based on race. The agency said the bank's initiatives could violate the Fair Housing Act, the 1968 law that bars discrimination in home sales, lending and related services on the basis of race, color, religion, sex, national origin, disability and familial status.

Opening a probe is an early step, not a finding. Based on the information available here, HUD has not concluded that the programs broke the law, and the summary of the action does not spell out how the programs are structured, who they were designed to serve or how long they have been in place. Those details will matter as the review moves forward. A program that directs assistance based on race raises different legal questions than one that uses race in outreach or marketing.

For a lender of Wells Fargo's size, the stakes reach beyond a single inquiry. Fair lending has been a long-running enforcement priority, and banks found to have steered borrowers or structured products along racial lines can face required changes to their programs, remediation payments to affected customers and damage to their standing with regulators and community groups. Wells Fargo has faced a series of federal enforcement actions in recent years, which tends to draw close attention to any new compliance question involving the bank.

For people following the housing market, the main takeaway is that an investigation is not a ruling. Programs named in a probe can be revised or withdrawn before any outcome, and the agency's review could take months. Borrowers who believe they were treated unfairly in a mortgage transaction can file a fair housing complaint with HUD, which handles complaints of this kind.