Wells Fargo was snared in an industrywide probe into mortgage bankers’ use of loan discounts last year, CNBC has learned.

The discounts, known as pricing exceptions, are used by mortgage personnel to help secure deals in competitive markets. At Wells Fargo, for instance, bankers could request pricing exceptions that typically lowered a customer’s APR by between 25 abd 75 basis points.

The practice, used for decades across the home loan industry, has triggered regulators’ interest in recent years over possible violations of U.S. fair lending laws. Black and female borrowers got fewer pricing exceptions than other customers, the Consumer Financial Protection Bureau has found.

“As long as pricing exceptions exist, pricing disparities exist,” said Ken Perry, founder of a Washington-based compliance firm for the mortgage industry. “They’re the easiest way to discriminate against a client.”

Wells Fargo received an official notice from the CFPB called an MRA, or Matter Requiring Attention, on problems with its discounts, said people with knowledge of the situation. It’s unclear if regulators accused the bank of discrimination or sloppy oversight. The bank’s internal investigation on the matter extended into late this year, said the people.

Wells Fargo, until recently the biggest player in U.S. mortgages, has repeatedly felt regulators’ wrath over missteps involving home loans. In 2012, it paid more than $184 million to settle federal claims that it charged minorities higher fees and unjustly put them into subprime loans. It was fined $250 million in 2021 for failing to address problems in its mortgage business, and more recently paid $3.7 billion for consumer abuses on products including home loans.

The behind-the-scenes actions by regulators at Wells Fargo, which hadn’t been reported before, happened in the months before the company announced it was reining in its mortgage business. One reason for that move was the heightened scrutiny on lenders since the 2008 financial crisis.

Wells Fargo later hired law firm Winston & Strawn to grill mortgage bankers whose sales included high levels of the discounts, said the people, who declined to be identified speaking about confidential matters.

In response to this article, a company spokeswoman had this statement:

“Like many in the industry, we take into consideration competitor pricing offers when working with our customers to get a mortgage,” she said. “As part of our renewed focus on supporting underserved communities through our Special Purpose Credit Program, we have spent more than $100 million over the last year to help more minority families achieve and sustain homeownership, including offering deep discounts on mortgage rates.”

Wells Fargo was “proud to be the largest bank lender to minority families,” she added.

The bank later had this additional statement: “While we cannot comment on any regulatory matters, we don’t discriminate based on race, gender or age or any other protected basis.”

Regulators have ramped up their crackdown on fair lending violations recently, and other lenders besides Wells Fargo have been involved. The CFPB launched 32 fair lending probes last year, more than doubling the investigations it started since 2020.

Several banks received MRAs about lending practices last year, the agency said without naming any of the institutions. The CFPB declined to comment for this article.

The issue with pricing exceptions is that by failing to properly track and manage their use, lenders have run afoul of the Equal Credit Opportunity Act (ECOA) and a related anti-discrimination rule called Regulation B.

“Examiners observed that mortgage lenders violated ECOA and Regulation B by discriminating against African American and female borrowers in the granting of pricing exceptions,” the CFPB said in a 2021 report.

The agency found “statistically significant disparities” in the rates in which Black and female borrowers got pricing exceptions compared with other customers.

After its initial findings, the CFPB conducted more exams and said in a follow-up report this year that problems continued.

“Institutions did not effectively monitor interactions between loan officers and consumers to ensure that the policies were followed and that the loan officer was not coaching certain consumers and not others regarding the competitive match process,” the agency said.

In other cases, mortgage personnel failed to explain who initiated the pricing exception or ask for documents proving competitive bids actually existed, the CFPB said.

That tracks with the accounts of multiple current and former Wells Fargo employees, who likened the process to an “honor system” because the bank seldom verified whether competitive quotes were real.

“You used to be able to get a half percentage off with no questions asked,” said a former loan officer who operated in the Midwest. “To get an additional quarter point off, you’d have to go to a market manager and plead your case.”

Pricing exceptions were most common in expensive housing regions of California and New York, according to an ex-Wells Fargo market manager who said he approved thousands of them over two decades at the company. In the years the bank reached for maximum market share, top producers chased loan growth with the help of pricing exceptions, this person said.

In an apparent response to the regulatory pressure, Wells Fargo adjusted its policies at the start of this year, requiring hard documentation of competitive bids, said the people. The move coincided with the bank’s decision to focus on offering home loans only to existing customers and borrowers in minority communities.

Many lenders have made pricing exceptions harder for loan officers to get and improved documentation of the process, though the discounts haven’t disappeared, according to Perry.

JPMorgan Chase, Bank of America and Citigroup declined to comment when asked whether they had received MRAs or changed their internal policies regarding rate discounts.

— With reporting from CNBC’s Christina Wilkie.

Wall Street isn’t expecting any drama when the Federal Reserve announces its final interest rate decision of the year on Wednesday.

The U.S. central bank is expected to leave rates at their current level of 5.25% to 5.50%. That would be the third consecutive meeting in which the Fed has left rates unchanged after it raised them at a historically rapid pace beginning in March 2022.

Annual inflation was at about 8% when the Fed started raising rates last year. In June it peaked at 9.1%. As of November, inflation was down to a more manageable level of 3.1%.

The Fed last raised rates at the end of July. Experts and investors are growing convinced that the Fed is probably done raising interest rates for the foreseeable future.

‘We think that the hiking cycle is done, though the committee will reserve the right to hike if necessary,’ a group of Bank of America economists wrote in a research note published on Friday.

Based on futures market data, CME Group’s FedWatch Tool says the odds are well above 90% that rates stay the same this month and at the Fed’s late January meeting as well.

After that, futures market data shows that market participants think there’s a strong chance the Fed will start cutting rates and almost no chance it will raise them further.

That’s led to a decline in long-term Treasury bond yields and in interest rates on mortgages and other loans. The yield on the 10-year Treasury note peaked at nearly 5% in mid-October, and it’s now down to about 4.2%.

According to the government-backed lender Freddie Mac, the interest rate on a 30-year fixed rate mortgage is down to about 7% as of Tuesday, after reaching 23-year highs of 8% in early October.

The Bank of America team wrote that it thinks the members of the Federal Open Market Committee will also forecast lower interest rates in 2024.

Referencing the Fed’s main interest rate, called the Federal Funds Rate, they wrote, ‘We look for the median member to project a 4Q 2024 funds rate of 4.6%, versus 5.1% in September. This would suggest that three [0.25%] cuts are likely if the economy evolves in line with the Fed’s baseline.’

It’s a dramatic and troubling claim: Two New York law professors, one of them a former commissioner of the Securities and Exchange Commission, say that bets were made against Israeli stocks in October and made millions after Hamas attacked Israel.

The allegations in the Social Science Research Network journal haven’t been peer-reviewed yet. But they attracted a lot of attention, partly because — as the authors acknowledge in their paper — there is no way to know if the trades were made by people connected to Hamas or people connected to Israel or neither.

The paper itself is a preliminary draft, written by Robert J. Jackson Jr., who was an SEC commissioner from 2018 to 2020 and is now a professor at New York University School of Law, and Joshua Mitts, a professor at Columbia Law School.

“Our findings suggest that traders informed about the coming attacks profited from these tragic events,” they wrote, referring to the attacks of Oct. 7.

The day after the attacks, Israel’s main stock exchange fell 8%.

But based on the data that is available to researchers and the public, it’s hard to say if it happened the way they theorized.

“There is not enough hard evidence to say definitively what happened,” said J.J. Kinahan, who has been involved with options trading since 1985. He is the the CEO of IG North America, which has an options trading business called Tastytrade.

“Without hard evidence of a brokerage statement or hard evidence of a trade, it’s hard to say ‘this happened,’” he said.

Israel’s stock exchange has rejected the claims that there was unusual trading activity before Hamas’ attacks. About 1,200 people in Israel died, and more than 200 were taken hostage, according to Israeli officials. The subsequent war has killed more than 17,000 Palestinians in the Gaza Strip, according to health officials there.

In terms of the initial attention and speculation the paper received, it did not help that in an earlier version of the report, the authors overstated the profits of one trade by a factor of 100. They mistook the Israeli equivalent of cents, or agorot, for dollars, or shekels, and said that these unknown parties may have made around $860 million in profit from a single short position against a large Israeli bank. With that error corrected, the actual profit would have been $8.6 million.

Jackson and Mills wrote that beginning in early October, some traders started betting that Israeli stocks were going to fall. They did that by taking short positions, stock market trades in which a person or company borrows a stock from someone else and then sells it. If the price of that asset falls below the sale price, they can then buy it back for a profit.

For example, Jackson and Mitts said, that on Oct. 2, there was an unusual increase in shorts taken out against the MSCI Israel Exchange-Traded Fund, a collection of 117 different Israeli stocks that traders can buy or sell the same way they could an individual stock.

“We document a significant spike in short selling in the principal Israeli-company ETF days before the October 7 Hamas attack,” they wrote.

The professors say that these bets were unusual given the context of Israel’s economy at the time. And they added that these unknown traders were taking bigger risks in the early days of October, which could mean they were more confident a big decline was coming.

Kinahan said it’s hard to know if that’s really what the traders were expecting. One reason is that traders often use options to hedge their market bets.

It might look sinister that someone shorted some Israeli stocks days before Hamas attacked, but Kinahan said it’s just as possible the traders actually made a far larger bet that Israel’s economy would thrive and hedged that bet by shorting some stocks and the MSCI ETF. That’s a common strategy used to mitigate potential losses.

“There could be a stock trade that this is the other side of,” he said.

It’s a limitation the authors acknowledged in the paper. Still, according to Mitts and Jackson, their research shows that short selling of Israeli stocks on the Tel Aviv Stock Exchange and shorting of Israel stocks in the United States also increased dramatically before the attacks.

News reports said that Hamas initially planned to attack Israel in early April, and the authors said they have found signs of similar shorting actions at that time. They said that could show that someone was prepared to implement the same trading strategy.

Yaniv Pagot, head of trading at the Tel Aviv Stock Exchange, said the authors did not understand the Israeli market.

“This is a flawed analysis from the outset and there is a lack of understanding of how the local market operates. It is unfortunate that the researchers did not check with Israeli stock exchange members, they could have asked how these things work in the country,” he said in a statement emailed to NBC News.

Kinahan also told NBC that while some stocks were shorted at greater than usual levels compared to typical trading, most of the stocks themselves are lightly traded. That means fluctuations in those stocks can look bigger than they really are.

The SEC told NBC News that it doesn’t comment on the existence or nonexistence of investigations, and the Financial Industry Regulatory Authority declined to comment.

In the aftermath of the terrorist attacks of Sept. 11, 2001, there were theories that someone connected to Al Qaeda shorted airlines and other stocks that suffered especially large declines once U.S. markets reopened six days after the attacks. The SEC spent almost three years looking into the matter, and said in 2004 that it “did not develop any evidence suggesting that anyone who had advance knowledge of the September 11 attacks traded on the basis of that information.”

For example, one trader who bet that United Airlines stock would fall turned out to have made a large corresponding bet that American Airlines would rise. Other suspicious trades on Sept. 10, 2001, were linked to a newsletter that had been faxed to subscribers the day before.

Experts think the government’s last price report of the year will provide more evidence that inflation is slowing.

The Bureau of Labor Statistics is scheduled to release its consumer price index Tuesday morning. Economists say they expect the data will show that overall prices were unchanged in November compared to October.

That includes a 0.3% increase in core prices, a more stable category that excludes the cost of food and energy.

“Though this would represent an acceleration at the core relative to October, we see this as mainly coming from a reversal in the volatile lodging away from home category,” a team of economists from Bank of America wrote this month, referring to travel and hotel accommodations in its estimation.

Compared to November 2022, economists expect to see a 3.0% increase in the overall price index, and a 4% increase in the core categories.

That’s a bit slower than the inflation reflected in October’s prices, as last month CPI was up 3.2% over the previous year. And core prices were the same at 4%.

Inflation has been slowing down gradually in recent months after it spiked to a 40-year high of 9.1% in June 2022. While slower inflation means the prices of many goods are still going up, the slower rate makes it easier for consumers to adjust, and for increased wages to help counteract the financial pain that inflation causes.

There are some signs that consumers are feeling better about the state of the economy as inflation cools off, even though they’re feeling pressure from high credit card interest rates and high housing costs.

If inflation does hold steady or continue to fade, it’s more likely the Federal Reserve will keep interest rates where they are instead of raising them further. The Fed, which will make its last interest rate call of the year on Wednesday, sharply raised rates from early 2022 to mid-2023 to try to contain inflation.

That’s the reason interest rates on items like credit cards and mortgages has increased so quickly over the last year and a half. But as investors and experts think that the Fed might not raise rates again in the near future, their expectations for long-term rates have started to come down. And in turn, that’s brought mortgage rates down a bit recently.

According to the government-backed lender Freddie Mac, the rate on 30-year a fixed-rate mortgage is now about 7%, down from around 8% in early October.

Hasbro is laying off about 1,100 employees as the toy maker struggles with soft sales that have carried into the holiday shopping season, according to a company memo obtained by CNBC.

Hasbro had about 6,300 employees as of earlier this year, according to a company fact sheet.

Shares of the company fell more than 4% in extended trading Monday. Rival Mattel’s stock also slipped after hours.

“We anticipated the first three quarters to be challenging, particularly in Toys, where the market is coming off historic, pandemic-driven highs,” CEO Chris Cocks said in the memo. “While we have made some important progress across our organization, the headwinds we saw through the first nine months of the year have continued into Holiday and are likely to persist into 2024.

Hasbro, which already laid off hundreds of employees earlier this year, had warned in October that trouble was on the horizon. In the company’s most recent quarterly earnings report, Hasbro slashed its already-soft full-year outlook, projecting a 13% to 15% revenue decline for the year.

Popular toy brand sales had dropped significantly, Hasbro also said in the October quarterly report. Popular brands like My Little Pony, Nerf and Transformer had fallen 18% at the time, due to “softer category trends.”

Hasbro’s stock was down nearly 20% through Monday’s close.

Hasbro competitor Mattel had also warned of soft sales. Yet Mattel’s stock is up about 6% through Monday, powered a great deal by the box office success of the film “Barbie.” That’s still behind the 17% gain posted by the S&P 500 so far this year, though.

Retailers overall could be in for a tepid holiday season, and toys saw lower discounts for consumers when compared to discounts a year ago. 

The housing market might be turning around for frustrated would-be buyers as mortgage rates dip and listings rise, according to the real estate brokerage Redfin.

The interest rate on a 30-year fixed mortgage is down to a weekly average of 7.03%, according to government-backed lender Freddie Mac. It peaked at just above 8% in early October. That marked a 23-year high.

In response to that change, Redfin says, mortgage applications are up 15% since early November, when they hit a 28-year low, and new listings of homes are up 7% from last year, when interest rates were spiking.

As a result, applications to buy a home are rising.

But if the housing market is thawing, it’s not happening very quickly. In a news release issued Thursday, Freddie Mac said there are already signs that the growth in applications is slowing down.

‘Although these lower rates remain a welcome relief, it is clear they will have to further drop to more consistently reinvigorate demand,’ it said.

Mortgage rates have decreased recently because investors are becoming convinced that the Federal Reserve is done raising interest rates for now. Between March 2022 and July 2023, the Fed raised its benchmark rate from just over zero to a range of 5.25% to 5.5%. That was a dramatic change, and that made it much more expensive to take out a mortgage.

It also meant people who had owned their homes for at least a few years, who might have locked in a mortgage in the 3% to 4% range, didn’t want to sell. The lack of homes on the market contributed to big increases in home prices.

A month or two of improvement can only go so far in changing that. Redfin said that over the 12 months that ended Dec. 3, the median sale price of a U.S. home rose 4.1% to $364,166. But because of the surge in mortgage rates, the median monthly mortgage payment rose 15%, at $2,561.

That’s a bit better compared to two months ago, but still more than double the average payment from three years ago. The number of homes on the market is still lower than it was at this time last year.

Experts say the only thing that will bring about a sustained change is an increase in the number of homes for sale, and Redfin says that’s starting to happen in some markets. New listings are up, and the decline in older listings is slowing down.

Redfin says that in five of the 50 largest U.S. metro areas, including Portland, Oregon, and Houston, prices are decreasing. It thinks that trend will spread to more cities in 2024 even as mortgage rates slip a bit further.

Overall, the company expects that about 4.3 million homes will be sold in 2024, a 5% increase from 2023, and that mortgage rates will dip to 6.6% by the end of the year.

Many blue-collar workers are riding into 2024 on a year’s worth of stronger hiring, more plentiful job opportunities and faster pay growth than some of their white-collar counterparts.

After two years of rapid growth, the United States’ job market is finally slowing down as 2023 draws to a close, but Americans broadly continue to benefit from its strengths. Unemployment clocked in at 3.7% last month, the 22nd straight month when the jobless rate has held below 4%.

People also appear to be working or looking for jobs at higher levels than before the pandemic, with 83.3% of those between the prime ages of 25 to 54 participating in the labor force.

But with job gains slowing from an average of 399,000 a month over the course of last year to 232,000 so far this year, workers’ historic surge in bargaining power during the post-pandemic rebound is now on the wane. A top culprit: higher interest rates from the Federal Reserve meant to quell inflation, which peaked in summer 2022 above 9% and is now hovering around 3%.

Many white-collar employers have cut down on hiring this year. The tech sector has seen some of the sharpest pullback — and deepest layoffs — after correcting for a pandemic-era glut and adapting to higher interest rates that have made corporate borrowing costs much higher.

For jobs in software development and IT operations, Indeed data shows there are fewer postings now than there were before the pandemic. Job postings for manufacturing roles, however, are up a whopping 46%.

“It’s been a much starker pullback in white-collar, traditional office jobs,” said Indeed Hiring Lab Director of Economic Research Nick Bunker.

The divide also shows up in job postings by work arrangements, where work-from-home roles tend to be concentrated in white-collar jobs compared to more hands-on blue-collar work. Indeed data shows fewer job postings now than pre-pandemic for highly remote jobs, whereas those for more in-person roles remain above pre-pandemic levels.

In another sign of the blue-collar workforce’s comparative strength, people with the least education have seen some of the steepest growth in employment levels. Those without a high school degree saw a 5.7% jump this year, well above the national average of 1.1% employment growth.

Their rebound makes up some of the shortfall suffered during the pandemic, when workers who didn’t graduate high school saw some of the worst job losses. Bachelor’s degree holders maintain their long-running edge in employment levels despite slower recent gains.

Overall, workers are making more than they did a year ago.

Largely blue-collar fields like manufacturing have seen faster average hourly earnings growth in 2023 than many primarily white-collar categories like business and professional services. And many blue-collar workers’ pay gains continue to outpace inflation — which hasn’t been the case for some white-collar professionals this year.

In the mining and logging sector, for example, wages grew by 4.2% over 2023. Pay for information-based roles has risen by only 2.3% this year.

Of course, many blue-collar jobs are lower paid than white-collar ones, so faster wage gains may not narrow the earnings gap substantially between the two groups. What’s more, lower earners typically have less savings to endure rising prices than do higher earners, meaning the economic picture likely remains more difficult for blue-collar workers — even those landing raises and promotions.

Still, Bunker says labor market trends remain largely positive for lower-earning households heading into next year.

“Wage inequality has come down over the past few years because that bottom distribution has done relatively well,” he said.