Safe, affordable housing is a key pillar of the American Dream. It’s a pathway to financial success for our customers, and a source of stability in our communities. Owning a home is also one of the most important pathways to wealth creation, providing families with a foundation for improving their financial position across generations.
Wells Fargo continues to play a leading role in the crucial, industrywide effort to increase racial equity in homeownership through close partnership with stakeholders across the housing sector as well as special programs and targeted investments in communities of color.
Below, Chuck Bishop, Head of Diverse Segments for Home Lending for Wells Fargo explains what a Special Purpose Credit Program (or SPCP) is, and how Wells Fargo’s program aims to advance homeownership for minority customers and align with their Home Lending strategy announced earlier this year.
What is a Special Purpose Credit Program?
In 1976, the Equal Credit Opportunity Act (ECOA) authorized the creation of an SPCP to allow lenders to create a loan program that considers protected bases, such as race or ethnicity, to meet special social needs or help economically disadvantaged populations.
Although SPCPs have been around for decades they may not have been widely implemented, in part, because of a need for greater clarity in creating a compliant program. In February 2022, the Consumer Financial Protection Board (CFPB) acknowledged the need for further guidance on how to develop SPCPs to be consistent with the ECOA and joined seven other federal agencies in issuing a statement encouraging lenders to explore opportunities available to increase credit access through Special Purpose Credit Programs.
Is it discriminatory to have a lending program that focuses on a specific racial or ethnic group?
Under Federal law, lenders are permitted to design and implement Special Purpose Credit Programs to increase access to credit to better serve historically disadvantaged individuals and communities. An SPCP allows lenders to consider factors including race and ethnicity, national origin, and gender to meet special social needs. SPCPs can play an important role in promoting equity and inclusion, building wealth, and removing barriers that have contributed to financial inequities, housing instability, and residential segregation.
How do Wells Fargo’s Special Purpose Credit Programs work?
Wells Fargo launched our first SPCP in 2022. Through the program, more than 4,100 existing Black Wells Fargo customers who may not have taken advantage of low mortgage interest rates prior to when the market rate surged have been able to lower their rate and their monthly payments without extending their loan term.
This year, we announced an expansion of our SPCP efforts to include purchase loans. The new Homebuyer AccessSM grant, developed under a Special Purpose Credit Program, provides downpayment assistance and is available to homebuyers who are purchasing homes in or who currently live in select areas in eight Metropolitan Statistical Areas (MSAs) to start:
• Minneapolis–St. Paul–Bloomington, MN-WI
• Philadelphia–Camden–Wilmington, PA-NJ-MD-DE
• Dallas–Ft. Worth–Arlington, TX
• Washington–Arlington–Alexandria, DC-VA-MD-WV
• Baltimore–Columbia–Towson, MD
• Atlanta–Sandy Springs–Alpharetta, GA
• Charlotte–Concord–Gastonia, NC-SC
• New York–Newark–Jersey City, NY-NJ- PA
This program can be combined with many other programs for which they may qualify including the Dream. Plan. Home.SM closing cost credit, the Employee Mortgage Program, Corporate Relocation, and more.
What advice do you have for homebuyers?
Potential homebuyers looking to purchase a home in any of the eight metropolitan areas and those who currently live in those areas can find out more about the Special Purpose Credit Program by visiting wellsfargo.com/homegrant, calling 866-327-6414, or contacting a Wells Fargo Home Lending office in their area.
Other programs are available in addition to the SPCP. Everyone’s financial situation is unique to them and it’s important to speak with a mortgage professional or HUD approved housing counseling agency to begin the homeownership journey. Ask questions like what types of loans are available; if there are programs to assist with downpayment or even closing costs; what the requirements are for loan approval. Aspiring homeowners should understand as much as they can about the homeownership journey before beginning. It could make a difference in the kind of experience you have.
Also, don’t assume that myths about purchasing a home are true. You don’t necessarily need a high downpayment or perfect credit to make your homeownership dreams a reality. Many lenders have programs that are aimed at assisting low- and moderate-income buyers. Educate yourself and ask questions to explore your options.