Wells Fargo drops 2.2% on federal probe into lending

Wells Fargo shares dropped 2.2% to a session low on Wednesday after The Wall Street Journal reported that the bank faces a federal probe into programs designed to boost Black homeownership. The stock later pared losses to trade down 1.6%, near its pre-report levels.

The Department of Housing and Urban Development (HUD) sent Wells Fargo Chief Executive Charlie Scharf a letter stating it will examine whether the bank breached fair lending laws by favoring Black or other minority homeowners. Wells Fargo did not immediately comment. HUD said the lender used a strategy of sorting homeowners and offering different terms or products based on race. HUD Secretary Scott Turner said the agency plans a full investigation into Wells Fargo's statements and is reviewing similar programs at other banks.

The probe targets an initiative started in 2017, when Wells Fargo pledged 60 billion dollars in loans to add at least 250,000 Black homeowners by 2027. The bank broadened the program in 2022 to refinance minority mortgages with its own capital after a Bloomberg report revealed it rejected half of Black refinancing applications in 2020. According to the Pew Research Center, 24% of Black households owned their homes in 2024, compared with 73% of White households.

Wells Fargo had completed about 40% of its 60 billion dollar lending target and refinanced roughly 5,100 borrowers when it ordered a racial-equity assessment in late 2023. The bank has since taken that assessment down from its website.