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New data shows Blacks, Latinos more likely to be denied mortgages in Denver metro area

9Wants to Know reviewed data that showed Blacks and Latinos in Colorado were 1.6 times more likely to be denied a mortgage.

DENVER — A data analysis conducted by The Markup, and reviewed by 9Wants to Know, found even when controlling for factors like income, debt and value of the property – Black and Hispanic residents in the Denver metro were 1.6 times more likely to be denied a mortgage. 

This means even when applicants were paid the same or had the same amount of debt, Black and Hispanic Coloradans living in Denver, Aurora and Lakewood were more likely to be shut out of the housing market. 

Experts believe historic and systemic racial inequalities, such as redlining and segregation, still contribute to homeownership disparities in communities of color. 

Muriel Williams-Thompson, managing broker with Town and Country Realty, said another factor that plays a role into whether a borrower is approved or denied for a mortgage is reserves. "So, the amount that borrower has at their fingertips, so what they have in their savings account, their checking account, 401K, what they might’ve been gifted from another family member," Williams-Thompson said. 

In the U.S., homeownership is synonymous with building wealth. Wealth accumulated through a home can be generational, meaning children of homeowners are more likely to own a home themselves. 

"If you don’t have the generational knowledge to pass on of how to prepare for homeownership, there’s obstacles," Williams-Thompson said.

Sam Cardenas, a realtor in the Denver metro area for more than 30 years said Blacks and Latinos face similar barriers on their path to homeownership.

Another systemic barrier Cardenas points to is distrust in banks and financial institutions. "I would say that there’s a large segment of the population that don’t trust banking institutions and they have mattress money where they save their money, they have savings, but it’s just not in a bank," he said. "People that don’t believe in credit, that don’t have bank accounts, that don’t have credit cards, you have to be able to establish some sort of credit history, not to be credit invisible." 

These are the 17 factors The Markup used against loans that were denied: 

  • Race
  • Sex
  • Age
  • Income
  • Whether the application had a co-applicant
  • Loan amount
  • Property value
  • Mortgage term
  • Credit model used
  • Debt-to-Income ratio
  • Combined loan-to-value ratio
  • The automated underwriting system used
  • The ratio between the median income of the census tract where the property is located and the median income of the metro
  • The type of lender 
  • The size of the lender 
  • Non-Hispanic White population percentage of the census tract where the property is located 
  • Size of the metro where the property is located

You can review the data yourself here

What is redlining and how are its affects still present today?

Redlining was the practice of banks and other financial institutions had of declaring certain neighborhoods hazardous and denying loans in those areas. The neighborhoods marked red on the map were predominately communities of color.

It took more than 30 years for the federal government to outlaw redlining, and their lingering effects still exist today.

Both Williams-Thompson and Cardenas said the lasting effects of redlining and segregation can be seen by the fact that Blacks and Latinos are not evenly distributed across the Denver metro area.

“There are still some concentrated areas where you have Black and Brown families that live there mostly, unfortunately, those are the areas that are targeted by a lot of investors as well,” said Williams-Thompson.

How is gentrification contributing to disproportionate homeownership rates in people of color? 

In Denver’s Berkeley area, Cardenas said the neighborhoods near Inspiration Point Park at one point had a high Latino population. “Slowly, but surely, they’re being bought out. It’s hard to fathom, not even 12 years ago, this area was very affordable, today it’s not.”

Cardenas said Blacks and Latinos in Denver tend to live in areas east of town including, but not limited to: Green Valley Ranch, Montbello, East Aurora and some areas of north Denver. 

"It’s where the affordable housing is, basically is where the trend is," Cardenas said.

Cardenas said the lack of affordable housing makes it even more difficult for those without access to generational wealth to become homeowners. “Unless you have a lot of money down, you’re probably not gonna be able to compete as a buyer in this market, you have to have money down, great credit, great work history, and if you don’t have any of that, you’re just gonna be priced out of the market,” he said.

How can these disparities be fixed? 

"That's a million-dollar question," said Williams-Thompson. She said one thing that could help address these racial gaps is more equitable lending and down payment assistance programs. "Ones that do level the playing field, ones that actually allow the borrower to be able to get access to those funds, maybe they don’t have to pay it back if they’re from Black and Brown community, maybe they are actually able to pay it back only in certain scenarios, but really not changing the criteria for them to access those funds is actually really key," she said.

She encouraged those who are interested in purchasing homes to find realtors and lenders who are genuinely interested in their financial and long-term goals.

“There are some lenders that I feel don’t really care about what happens to certain families…if they have a big pile of paperwork on their desk," Williams-Thompson said. She added that some lenders are more likely to approve the applicant that looks better on paper, without asking other applicants questions that could still prove financial responsibility.

“So are you able to pay off a credit card, are you able to pay off a car, are you able to pay down some debt or something like that, before they actually enter the search, maybe that family has the ability to do that but you have a loan officer that didn’t ask that question, so now they are denied the loan,” she said.

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