Wells Fargo offers down-payment grants to boost minority homeownership
Wells Fargo is rolling out a program to boost minority homeownership by giving qualified buyers $10,000 grants for their down payments.
It's the latest bank to expand credit to historically underserved communities by using special-purpose credit programs. The programs have grown in popularity since the 2020 death of George Floyd prompted the industry to rethink whether it can improve its services to underserved communities.
"Homeownership is central to building wealth but has been out of reach for many minority families as a result of systemic inequalities in housing and finance," said Kevin Reen, head of Wells Fargo Home Lending, adding that down payments are among "the biggest barriers to achieving homeownership."
The Wells Fargo homebuyer grants will start in eight metro areas: Minneapolis, Philadelphia, Dallas, Washington, Baltimore, Atlanta, Charlotte and New York.
Buyers who live or are buying a home in those markets can qualify for the grants if their income is 120% or less of the median income of the county the home is in. Recipients can use the funds only on down payments for a conventional fixed-rate mortgage from Wells Fargo.
They can also combine them with other programs to get more assistance, including Wells Fargo programs that help buyers pay for closing costs on their purchase.
The San Francisco lender is conducting the effort under its special-purpose credit program, a type of initiative regulators have encouraged to help expand credit to disadvantaged groups.
The programs are allowed under the Equal Credit Opportunity Act of 1974, though many lenders had long feared they'd be charged with favoring one group of people over another.
But regulators have recently assured bankers that they can launch those programs without triggering concerns. In 2021, the Department of Housing and Urban Development said the programs generally don't conflict with the Fair Housing Act. A broader group of bank regulators, including the Federal Reserve and Consumer Financial Protection Bureau, sent a similar message to banks last year.
The programs are "one method to address discrimination and bias in mortgage credit transactions," Fed Vice Chairman for Supervision Michael Barr said in a speech last month.
Wells Fargo and other banks have launched programs in recent months as the regulatory environment became more clear.
JPMorgan Chase said last year a pilot program for small businesses in majority-minority neighborhoods would soon be offered nationally. Citigroup and Bank of America have also launched programs to help boost minority homeownership.
Additionally, regional banks such as U.S. Bancorp in Minneapolis and Cleveland-based KeyBank have started programs of their own.
Wells Fargo has an existing special-purpose credit program initiative that has helped eligible Black homeowners refinance their homes at low interest rates.
The program, which started last year, is aimed at homeowners who didn't take advantage of ultralow mortgage rates earlier in the pandemic. Wells Fargo subsidizes the rate differential since rates are higher now, along with one-time expenses such as closing costs. More than 3,200 customers have used the program, the bank said.
