Wells Fargo on Thursday announced a new down payment grant program that will give $10,000 to homeowners who live in or are purchasing homes in underserved communities in eight metropolitan areas.
The grants, which the San Francisco-based lender said are part of its special-purpose credit program, will be available to homebuyers who earn a combined 120% or less of the area median income in the county where the property is located.
The bank is launching the program in Minneapolis, Philadelphia, Dallas, Washington, Baltimore, Atlanta, Charlotte and New York.
The grant funds can only be used toward the down payment on a Wells Fargo fixed-rate conventional loan secured by a property that will be the purchaser’s primary residence, the bank said.
Homebuyers who are eligible for the grant can combine it with other Wells Fargo programs and receive up to $15,000 to help them purchase their home, the bank said.
“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,” Kevin Reen, Wells Fargo’s head of home lending, said in a statement on Thursday. “One of the biggest barriers to achieving homeownership is coming up with the down payment.”
The grant rollout comes as regulators have encouraged banks to launch initiatives that extend credit to underserved groups through special-purpose credit programs.
Speaking at a conference hosted by the National Fair Housing Alliance last month, Federal Reserve Vice Chairman for Supervision Michael Barr said such programs are "one method to address discrimination and bias in mortgage credit transactions.”
For Wells Fargo, the initiative comes as the bank looks to repair its image in the wake of a series of consumer abuses stemming as far back as 2016, in addition to a more recent scandal tied to its “diverse slate” hiring policy.
The killing of George Floyd, who died at the hands of a Minneapolis cop in 2020, has also sparked an industry wide racial reckoning, with firms like Wells Fargo, Citi and JPMorgan Chase pledging to increase their lending to diverse communities in efforts to address racial discrimination and bias in the banking sector.
Wells Fargo’s grant program also comes as many lenders have scaled back their mortgage lending operations as rising interest rates have led to a drastic drop in demand for home loans and refinancing.
The bank announced in January that it was streamlining its mortgage business to focus on existing customers and nonwhite communities.
As part of the bank’s new “strategic direction,” Wells Fargo said it would also exit its correspondent lending business, a unit of the bank that buys loans from third-party lenders.
The bank’s decision to step back from mortgages marks an identity shift for the firm, which, as recently as 2019, was the nation’s top home lender with $201.8 billion in volume, according to data from Inside Mortgage Finance.