The 2900 block of Walbrook Avenue in Baltimore. Videographer: Nathan Howard/Bloomberg

Big US Banks Fall Short on Promises to Create Black Homeowners

One block in Baltimore tells a story of why America’s racial wealth gap remains as wide as ever

By Shawn Donnan, Ann Choi and Christopher Cannon

December 19, 2022, 5:00 PM EST

The 2900 block of Walbrook Avenue in Baltimore is a study in contrasts. Row houses with tidy yards stand next to abandoned brick shells and rundown rental buildings. Residents describe a dwindling community of working-class Black homeowners with ties going back generations. Property records tell another story, one about America’s racial wealth gap and the banks that walked away.

Wells Fargo & Co., once the nation’s biggest home lender, has held mortgages on six houses on the block in recent decades, according to those records. Bank of America Corp. had five and JPMorgan Chase & Co. one. Today, those banks are mostly a memory. The last Bank of America loan was paid off last year. There’s only one Wells Fargo mortgage left and one from JPMorgan — both to landlords.

The exodus from Walbrook Avenue has been replicated across the country since the subprime mortgage crisis blew up the financial system more than a decade ago and a wave of foreclosures washed through cities like Baltimore. And to this day it undercuts $120 billion of promises made by the largest banks to increase lending to Black homebuyers and help right one of the country’s great economic wrongs.

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Wells Fargo, run by Tim Sloan at the time, made the boldest pledge in 2017, vowing to lend $60 billion to create 250,000 Black homeowners within a decade. But last year, the San Francisco-based lender underwrote 42% fewer mortgages to Black buyers than in the year it announced its target, a Bloomberg News analysis of data covering more than 50 million mortgages over the past 15 years found. Even counting mortgages purchased from other lenders, Wells Fargo has backed successively fewer loans in each of the past five years, hitting a 15-year low in 2021.

“That’s clearly going in the wrong direction,” says Brad Blackwell, the senior executive responsible for setting Wells Fargo’s 2017 goal, who retired from the bank the following year.

Sources: Bloomberg reporting, Google Earth

The 2900 block of Walbrook Avenue in West Baltimore illustrates how the withdrawal of the biggest US banks from the mortgage market has affected many Black communities.

Since the 1990s three big banks — Wells Fargo, Bank of America and JPMorgan Chase — have at one time or another held mortgages on 12 of the 38 lots on the block.

Today there’s only one Wells Fargo mortgage left and one from JPMorgan, both of them loans to landlords.

One thing dragging down property values for the homeowners who remain is the high number of vacant properties.

The pullback has affected borrowers of all races. In 2007, Wells Fargo, Bank of America and JPMorgan originated 19% of all US mortgages, Bloomberg found. By 2021, it was 4%.

In Baltimore, where a majority of the population is Black, the numbers are just as dramatic. Loans the three banks underwrote in predominantly Black neighborhoods fell to 1.2% of all mortgages in the city last year from about 10% in 2007.

Wells Fargo doesn’t dispute the decline in its lending to Black homebuyers since 2017. But it says its own calculations, which counted investment properties as well as owner-occupied homes, show the bank has backed more mortgages than the Bloomberg analysis. The bank didn’t respond directly to questions about how it plans to meet its pledge.

“Systemic inequities in the US have prevented minority families from achieving their homeownership and financial goals for too long,” Wells Fargo said in a statement. “Events and economic conditions of the last several years have further compounded the issue. Government and the private sector need to work together with community groups across the country to develop solutions that help address the gap.”

On Tuesday, the bank agreed to pay $3.7 billion to settle a variety of allegations made by the Consumer Financial Protection Bureau over the mistreatment of customers, including the “widespread mismanagement” of auto loans, mortgages and deposit accounts.

Source: Bloomberg analysis of Home Mortgage Disclosure Act data

JPMorgan, which in October 2020 pledged to create 40,000 new Black and Latino homeowners on top of what it was doing in 2019, has made only modest progress toward its goal. Last year it underwrote 122 additional mortgages for Black homebuyers, with the number of loans to Hispanic buyers actually falling.

Shannon O’Reilly, a spokeswoman for JPMorgan, says the bank remains committed to its goal, even though “market dynamics could affect the specific timing.” JPMorgan is expanding its presence in Baltimore, where it didn’t have a retail outpost until 2019. This month it opened a branch not far from Walbrook Avenue, pitching the event as a sign of the bank’s commitment to the city’s Black communities. “If we don’t take a little bit of time to lift up all of our society, and we leave part of our society behind, we will all be worse off for that,’’ Chief Executive Officer Jamie Dimon said at a ribbon-cutting ceremony.

Bank of America has announced at least $30 billion in homeownership programs aimed at low-income and minority borrowers in recent years and said in August that it would offer zero-down mortgages in five cities. The bank has almost doubled the number of mortgages it underwrote for Black buyers since 2017, but its lending to that group remains less than one-fifth of what it was in 2007. The bank says it intends to meet its commitments. Increasing the Black homeownership rate “is a fundamental question that the industry is focused on,” says Matt Vernon, head of retail lending.

That rate remains stuck at about 45%, almost 30 points below that of White households — a gap that hasn’t changed much since the 1960s and that underpins the wealth divide.

The three banks have given millions of dollars in recent years to local and national housing groups working on increasing Black homeownership rates and have taken part in policy discussions in Washington. But those philanthropic efforts don’t match the trends in the lending data.

Bank executives put the blame for their diminished lending elsewhere: on increased capital requirements that reduce their capacity to lend, on regulations introduced after the financial crisis, on the billions of dollars in fines they paid for sloppy underwriting practices and on wider social problems that result in lower incomes and credit scores in Black communities.

Bloomberg reported earlier this year on racial disparities in Wells Fargo’s approval rates for homeowners seeking to refinance their mortgages during the pandemic to take advantage of historically low interest rates. The new analysis of federal Home Mortgage Disclosure Act records released by the Consumer Financial Protection Bureau focused on new mortgages, both those originated by banks and those bought from other lenders.

Mortgages for Black homebuyers plummeted by more than 60% — farther than those for borrowers of all other races — from 2007, when credit was easiest, to 2011, as big banks curbed their lending, the data show. Nonbank lenders such as Rocket Cos. eventually replaced them. But it wasn’t until 2020 that total loans to Black homebuyers exceeded 2007 levels.

Even with that surge, Black homebuyers in the first half of this year accounted for only 3% of purchases in the US, the National Association of Realtors reported in November. The banks’ promises will be harder to meet as the Federal Reserve’s battle with high inflation keeps mortgage rates near their highest in two decades, and home sales dwindle.

For many Black neighborhoods, the pullback was crushing, says Sean Closkey, president of Rebuild Metro, a housing group working to rehabilitate blighted Baltimore neighborhoods. He says banks cut the “capital artery” to many communities. That it happened after a financial crisis they helped cause, he says, “that’s the smoking gun.”

Terrence Jones Jr. used to live at 2903 Walbrook. He remembers the surprise he got one afternoon in 2013 when he came home from school to find his mother waiting outside with grim news: They’d lost their house to the bank.

Jones’s father had fallen behind on the $65,000 mortgage he took out in 2003. He had cut his work hours to take care of his sick wife, and although she recovered, the family never caught up. “They just put us out,” says Jones, now 23. “They wouldn’t even let us get any of our stuff.”

Terrence Jones Jr. outside his childhood home on Walbrook Avenue. Photographer: Nathan Howard/Bloomberg

Wells Fargo, which didn’t respond to questions about the Joneses, had bought the mortgage in 2012 from another lender and transferred the deed to foreclosure lawyers the following year. The house was sold by the bank in 2016 for $500 to a Pennsylvania investor who flipped it for $9,000, property records show. It was refurbished and sold again for almost $90,000 last November.

Next door, at 2901, a house that was the subject of a Bank of America foreclosure is now a vacant shell. The mortgages on the block that pop up in property records in recent years are from nonbank lenders such as Rocket and Texas-based PrimeLending, which provided the loan used to buy the former Jones house last year. What you don’t see are new mortgages from big banks.

Rudy Miales, a retired longshoreman who has lived on the block since 1980 and paid off a Bank of America mortgage years ago, has watched families leave and a transient population of renters take their place. “All these people over here, they might not be here tomorrow,” Miales says, pointing to a cluster of rentals across the street.

The Joneses’ house was one of at least 3,000 Baltimore properties that Wells Fargo transferred to property lawyers, an initial step toward repossession, from 2012 through 2021, a Bloomberg review of public records found. That was more than its peers, and more than the number of mortgages the bank originated for borrowers of all races in the city during that period.

Inhabited and abandoned homes along the 2900 block of Walbrook Avenue. Photographer: Nathan Howard/Bloomberg

About three-quarters of the properties Wells Fargo turned over to lawyers were in predominantly Black census tracts. Many of the mortgages, like the Joneses’, had been purchased from other lenders. It isn’t clear how many people ended up losing their homes. But the arithmetic is clear: Subtractions by foreclosure matter as much as new loans when calculating ownership rates.

“It was a place that we could call home,” says Jones, who this month started working for Southwest Airlines at Baltimore/Washington International airport. It was also an asset that his parents, who now rent, could have passed on to him. “It definitely would’ve been nice to have them say one day that ‘You can have that house.’”

Jones says he’s down on the idea of getting a mortgage: “I don’t want to go through the same thing that my father went through, and my family went through, with losing the house.”

One reason the big banks extended fewer mortgages to Black homebuyers was their decision after the subprime crisis of 2007 to pull out of the market for Federal Housing Administration-backed home loans to low-income and first-time buyers.

That withdrawal followed a decision by federal regulators to use the Civil War-era False Claims Act to levy billions of dollars in fines against banks for loans that went bad.

“Why would a bank make an FHA loan when the False Claims Act can still be used to second-guess everything they’ve done in a down economy and cost them billions and billions of dollars more?” says David Dworkin, a former housing policy adviser at the US Treasury who leads the National Housing Conference, a group that works with lenders and advocacy and civil rights groups.

There were other reasons for the pullback beyond FHA loans, which account for less than 10% of the market. The industry’s reliance on commissions, making the sale of high-value “jumbo” mortgages in affluent White suburbs more profitable, hasn’t helped encourage lending into Black communities, Dworkin says. And there are issues, he says, with how young Black Americans like Jones became disillusioned with the idea of buying a home.

Bank executives say comparisons to 2007 are unfair and that regulation has fundamentally changed the mortgage business. Nonbank lenders, which they say face fewer restrictions, account for a larger share of the market, especially for low-income buyers. Rocket, now the biggest originator in the US, issued 12,029 mortgages to Black homebuyers in 2021, almost twice as many as the previous year and more than the three banks combined.

Rocket hasn’t announced any Black homeownership goals, but the company says it’s subject to the same fair-housing laws as traditional lenders. “We believe actions speak louder than words, and as our results indicate, we are making progress every day to help close the racial homeownership gap,” says Aaron Emerson, a Rocket spokesman.

The surge in online mortgage lending helped push up the Black homeownership rate last year to 45%, from a low of 41% in 2019. But that progress is unlikely to be sustained if interest rates remain high. In the first half of 2022, Rocket reported originating mortgages worth almost $100 billion less than in the same period last year.

While increased nonbank lending to Black homebuyers has been welcome, big banks have a responsibility to stay involved, says Dedrick Asante-Muhammad, who oversees policy and equity programs at the Washington-based National Community Reinvestment Coalition. “They have a higher obligation to do this type of lending,” he says, “and they’re failing in a way that the nonbank institutions aren’t.”

Asante-Muhammad led an NCRC study that found boosting the Black homeownership rate to 60% over 20 years would require 165,000 mortgages a year above the 2019 level. “We really need radical change to not even get to equality, but just to get to substantive majority Black homeownership,’’ he says.

To get there, some policymakers have called for rooting out systemic bias in appraisals and credit scores, or modifying the 1977 Community Reinvestment Act to target loans by race rather than income. But closing the gap is also about volume: The number of first-time Black buyers needs to grow faster than the population. And that hasn’t been happening.

“We keep climbing a down escalator that moves faster and faster,” says Dworkin, whose National Housing Conference leads a campaign, endorsed by Bank of America, JPMorgan and Wells Fargo, to help create 3 million new Black homeowners by 2030.

No one wants a return to shady lending practices that led to the subprime crisis, but meeting that goal would require surpassing 2007 levels for many years to come.

Yet Wells Fargo, JPMorgan and Bank of America signed off on 44,000 fewer mortgages for Black buyers in 2021 than in 2007, housing data show. Their share of home loans originated for Black borrowers over the past five years has remained flat at about 3%.

When Wells Fargo set its 2017 goal, it knew it couldn’t rely on FHA mortgages, says Blackwell, who spent 17 years at the bank, ending up as executive vice president of housing policy and homeownership growth strategies. The strategy, he says, was to buy and originate more conventional mortgages for Black buyers, partly by recruiting more Black loan officers. But, he says, the recruiting effort struggled.

The pledge was made before Charlie Scharf was brought in as CEO in 2019 to clean up a series of scandals. He has abandoned the bank’s long-time aim to be the biggest US home lender and plans further cuts to the business, Bloomberg reported earlier this year. But Scharf told lawmakers in September that Wells Fargo is committed to working “within communities of color or those which are more racially and ethnically diverse.”

Blackwell says it’s hard to see the bank meeting its promises, particularly with the property market slowing. “When that happens,” he says, “the harder areas to lend are the first to suffer.”

Nneamaka Odum, a 29-year-old Internal Revenue Service officer, offers one example of how banks can help create new Black homeowners.

Odum had only $6,000 in savings when she went searching for a home in 2019. But in March 2020, as pandemic lockdowns began, she closed on a $137,000 five-bedroom house in Baltimore’s Waverly neighborhood.

“I didn’t have to pay a cent at closing,” she says. She got $29,000 in forgivable loans to cover her down payment and closing costs, $15,000 of which came from a Wells Fargo-backed program called NeighborhoodLIFT.

Nneamaka Odum at her home in Baltimore’s Waverly neighborhood. Photographer: Nathan Howard/Bloomberg

The program began after the bank agreed to provide at least $50 million in down-payment assistance in Baltimore and seven other cities as part of a 2012 settlement with the US Justice Department. Federal officials alleged that Wells Fargo had targeted minority communities with high-interest subprime mortgages and wrongly foreclosed on them — allegations the bank denied. Ultimately, the bank put more than $10 million into Baltimore through the program.

Lenders, policymakers and housing groups all say down-payment assistance is an effective way to boost Black homeownership, and all three big banks have such programs. But the loans haven’t always reached minority neighborhoods. One reason: Programs were often based on income, not race.

A Bloomberg review of Baltimore property records found that only 61% of the 682 recipients of Wells Fargo’s down-payment assistance from 2013 through 2021 bought homes in majority-Black census tracts. Some of those borrowers could have been White or Hispanic, and the review didn’t account for Black borrowers who bought homes in majority-White census tracts.

The big three banks — Wells Fargo, Bank of America and JPMorgan Chase — underwrote one in five mortgages in Baltimore in 2007, with majority-Black neighborhoods the leading destination for those loans.

By 2011, after the financial crisis, that volume of lending by the three banks had collapsed, with all neighborhoods seeing a decline of about 75%.

Lending fell further by 2021. The three banks issued just 2.7% of new residential mortgages in Baltimore that year — with less than half of those going to majority-Black tracts.

Nonbank lenders like Rocket Mortgage have helped fill the gap. They accounted for almost three-quarters of new mortgages in Baltimore in 2021.

Neither Wells Fargo nor Neighborhood Housing Services of Baltimore, a nonprofit group that administered the program, would provide a racial breakdown of recipients over the past decade. A spokesperson for NeighborWorks America, which oversees the national effort, did say that 32% of its down-payment assistance since 2019 has gone to Black homeowners. Recent efforts have been focused on rural areas and states with low Black populations, the spokesperson says.

Bank of America says it has provided down-payment and closing assistance to 38,000 buyers nationwide, two-thirds of them “multicultural.” The bank wouldn’t provide any further breakdown.

Despite years of neglect, there’s still hope on the 2900 block of Walbrook. Much of it rests in the hands of Neighborhood Housing Services of Baltimore, which became a mortgage originator to help clients struggling to get loans. The group has adopted the block, part of a five-by-seven-block area where it plans to invest as much as $30 million, mostly drawn from federal funds, to renovate about 100 vacant properties. The goal, says Executive Director Dan Ellis, is to restore roughly $100 million in wealth by lifting home prices and attracting new Black owners.

Sometimes the economics of projects can seem irrational. NHS bought 2935 Walbrook for $47,500 and plans to spend $188,000 renovating it. Add closing costs and sundries, and it is at least a $250,000 project, Ellis says. A similar NHS-renovated property on the next block sold for more than $200,000 last summer, so this one is likely to show a loss.

But, Ellis says, ignore the story of a single house, restore the market, and eventually the economics will make sense. You create a new comparison point for appraisers. Lenders once spooked by vacant properties will reengage.

Big banks are backing such projects. JPMorgan earlier this year gave a $2 million grant to another Baltimore housing nonprofit that does similar work. Wells Fargo has announced a series of grants for community groups around the country.

Too often, though, Ellis and others doing the work say, getting the capital to rehabilitate homes depends on philanthropic groups willing to take a risk to close the wealth gap. “That’s why we do it,” says Ellis. “Because no one else will.”

Updates with news of Wells Fargo settlement with the Consumer Finance Protection Bureau in 10th paragraph.

Editors: Robert Friedman, John Voskuhl and Alex Tribou

Assistance from: Katherine Doherty, Jason Grotto and David Scheer

Methodology:

To measure the progress of the largest US banks in expanding Black homeownership, Bloomberg News analyzed data for 50 million loans reported by lenders under the Home Mortgage Disclosure Act. The analysis covered 2007 through 2021, and included three of the biggest bank mortgage lenders — Wells Fargo, JPMorgan and Bank of America — which collectively accounted for 19% of loans to Black borrowers in 2007.

Bloomberg defined homeowners as borrowers who obtained home-purchase mortgages for their primary residence. HMDA data does not indicate whether a borrower is a first-time homebuyer, so any tally includes both repeat and first-time purchasers. The analysis included applicants who identified as non-Hispanic Black, as well as those households where co-applicants identified as non-Hispanic Black with a primary applicant who wasn’t Black. In some cases, mortgage applicants did not disclose racial information on their applications; these homeowners were excluded from racial counts.

The definitions and measurements the banks use vary. Wells Fargo includes both primary residences and investment or rental properties, and it counts mortgages the bank purchased from other lenders in addition to those it originated to Black borrowers, including Hispanic Black applicants. JPMorgan Chase includes only loans it underwrote for primary residences and counts Black borrowers, including Hispanic Black borrowers, and multiracial applicants who identified their second, third, fourth or fifth race as Black. Bank of America has not set a race-specific goal and did not share its methodology with Bloomberg.

Wells Fargo’s methodology resulted in a higher count of Black homeowners who received mortgages. The bank says it approved 81,900 mortgages to Black borrowers from 2017 through 2021, while Bloomberg counted 74,600. But the trends reflected in both banks’ analyses generally track with Bloomberg’s results. Bloomberg found a 42% decline among Black borrowers for Wells Fargo from 2017 through 2021; Wells Fargo’s analysis reflected a 39% decline. For JPMorgan, Bloomberg saw a 4% increase among Black borrowers over the past three years. The bank said its increase was 3%.

Separately, Bloomberg tracked recipients of Wells Fargo’s down-payment assistance program, NeighborhoodLIFT, using mortgage deeds recorded by county court clerks and the Maryland State Archives. To look at foreclosures, Bloomberg reviewed properties in the city of Baltimore that the three banks assigned since 2012 to substitute trustees, usually foreclosure lawyers, an initial step in the process. The addresses of the properties of NeighborhoodLIFT recipients and those with substitute trustees were geocoded to allow for demographic analysis using US Census Bureau data.

Big US Banks Fall Short on Promises to Create Black Homeowners

One block in Baltimore tells a story of why America’s racial wealth gap remains as wide as ever

Wells Fargo Falls Short

Homeownership Gap

Slow Recovery

Rise of Nonbank Lending

Disappearing Act