Wells Fargo Must Face Black Homeowners’ Bias Suit Over Appraisal

Wells Fargo Bank NA failed to shake off Fair Housing Act and federal civil rights claims brought by a Black couple who allege the company low-balled their refinancing appraisal due to their race.

Brigid and Joseph Washington can also proceed with their claims of racial discrimination under North Carolina’s consumer protection law, Judge Catherine C. Eagles of the US District Court for the Middle District of North Carolina ruled Wednesday.

The Washingtons’ suit is part of a wave of litigation, including a consolidated class action in federal court in California, accusing Wells Fargo of discrimination in refinancing.

The Washingtons’ claims under the Equal Credit Opportunity Act fail however, because although they said Wells Fargo refused to remove the requirement that they pay for mortgage insurance due to the low appraisal, they haven’t alleged that Wells Fargo rejected their refinancing application, Eagles said.

Eagles also dismissed the Washingtons’ fraud claim because they haven’t shown they relied on the appraisal. And their civil conspiracy claim fails because they haven’t alleged an agreement between Wells Fargo and the appraisal company, Eagles said.

In June 2020, the Washingtons sought to refinance their mortgage with Wells Fargo, hoping to decrease the mortgage term, and stop paying private mortgage insurance.

Wells Fargo initially estimated the value of their home at $525,000, but also required an in-person appraisal, according to the complaint.

Brigid was present during the appraisal and the home contained photos that identified the owners as Black, the complaint alleges.

The appraisal company valued the home at $480,000, which is $10,000 less than a 2018 appraisal, despite the fact that values in the area had increased in the past several years, the complaint alleges.

The appraisal didn’t rely on any comparable homes in the plaintiffs’ neighborhood but instead relied on less expensive homes in another neighborhood, the Washingtons allege.

Shortly afterwards, the couple applied to refinance with another company without disclosing their race, resulting in an appraisal of $540,000, according to the complaint.

A 2022 Bloomberg News investigation found that Wells Fargo rejected half its Black applicants during the mortgage refinancing boom.

Among major lenders, only Wells Fargo approved a smaller share of refinancing applications from Black homeowners in 2020 than a decade earlier, the report said.

Nationwide, only 47% of Black homeowners who completed a refinance application with Wells Fargo in 2020 were approved, compared with 72% of White homeowners, the report said.

Wells Fargo didn’t dispute Bloomberg’s statistical findings. It said it treats all potential borrowers the same, but is more selective than other lenders.

The Francis Law Firm PLLC represents the plaintiffs. Winston & Strawn LLP represents Wells Fargo.

The case is Washington v. Wells Fargo Bank, 2023 BL 23451, M.D.N.C., No. 22-CV-764, opinion 1/25/23.