When George Floyd was murdered last year by a white Minneapolis police officer, Mena Jones was taking classes to become a real estate agent.
She took a few days off to join protests, but mentally and physically exhausted, figured she should set her sights on a different way to make change. Her goal? Help Black residents in the Des Moines metro become homeowners.
“Being a homeowner in this country means so much to your credit, it means so much to the way people see you and look at you,” said Jones, now a Realtor with RE/MAX Concepts in Windsor Heights. “Owning a home is so significant — it just changes the game for you.”
But it turns out there are significant barriers to making her ambition a reality.
In the Des Moines/West Des Moines metro, Black applicants are 2.6 times more likely to be denied a conventional home loan than similarly qualified white applicants, according to an analysis of 2019 data released Wednesday by The Markup, a nonprofit newsroom.
Des Moines has the fifth-greatest likelihood of denial for Black applicants out of 71 U.S. metro areas that The Markup found had statistically significant disparities in home loan approvals. It tied with Albuquerque, New Mexico, and Stockton, California.
The Markup did not have the statistically significant data needed to determine whether other people of color in Des Moines were more likely to be denied loans than their white peers.
It found that nationally, mortgage lenders are 80% more likely to reject Black applicants; 70% more likely to deny Native American applicants; 50% more likely to turn down Asian/Pacific Islander applicants; and 40% more likely to reject Latino applicants.
For its analysis, The Markup examined more than 2 million conventional mortgage applications, accounting for 17 independent variables, including debt-to-income ratio and combined loan-to-value ratio. It did not take into account credit scores, which are not publicly available through Home Mortgage Disclosure Act data.
John Sorensen, president and CEO of the Iowa Bankers Association, said in a statement that while the organization “firmly believes that discrimination has no place in the mortgage market,” the data used by The Markup doesn’t give a full picture as to why these disparities exist.
“HMDA data does not include information such as a borrower’s credit score and credit history, which the law requires lenders to consider,” he said. “State and federal supervisory officials do have access to this information, however, and regularly review it to ensure that illegal discriminatory practices are not taking place.”
Yet Jones routinely sees disparities in the Des Moines metro as she does her work.
“It’s a problem and it needs to be fixed. It’s 2021, so it can be fixed,” she said. “I deserve a home, just like everybody else deserves a home. My clients deserve a home, just like everybody else deserves a home.
“And we deserve a process that’s not filled with extra gaps and paperwork. We deserve a smooth process and a caring process.”
More hoops to jump through for Black applicants
In her experience, Jones said she has run into some “crazy hiccups” that have resulted in more paperwork or pushed timelines for her Black clients.
Often, that means her clients’ deals fall through and they aren’t able to close on their homes — or even qualify for a loan in the first place.
In one instance, a borrower’s credit report was set to expire prior to closing. The bank ran a new check on her credit score, which had fallen since her preapproval, and the loan fell through. Jones’ client was able to secure a mortgage through another bank — but at an interest rate nearly triple the one she originally qualified for.
Jones wonders whether the bank could have pushed up her client’s closing date to accommodate the 120-day expiration date on the original credit report.
“I feel like with a white peer they would have done everything within their power to get it closed,” she said.
In another instance, a bank required one of her clients to sign paperwork prior to closing that other clients had been able to sign the day they closed.
Sadie Jackson, a south side Des Moines resident, said she has had similar problems. She hoped to purchase the home she is renting but was told her credit score is too low.
Jackson, a mother of six, worked to build up her credit to the score the bank wanted, 620, but then was told she needed more than was originally said for a down payment. By the time she had collected the $15,000 required, her credit score had dropped again.
“It’s just denial after denial. It’s just too much — it’s one thing after another,” she said. “All I want to do is purchase a home. If I die tomorrow from COVID, I want a place for my kids to call their own.”
Black residents fall behind in key indicators
A One Economy report by The Director’s Council, a group of local CEOs and organization directors, outlines why Polk County’s white and Black residents are living what it calls “A Tale of Two Cities.”
The report traces racial disparities in housing, education, employment, health and financial inclusion. First released in 2017, it was updated in 2020.
- While more than two-thirds of all Polk County adults are homeowners, less than one-third of Black adults are.
- The median household income for Black households is $33,816, compared to $63,530 countywide.
- 22.1% of Black Des Moines residents are unbanked, meaning they do not have a traditional checking or savings account, compared to the statewide rate of 3%.
- From 2014 through 2017, only 1.6% of all home mortgages in the Des Moines-West Des Moines area went to Black residents.
But the issue goes beyond what current statistics can reveal, said Lance Henning, executive director of Greater Des Moines Habitat for Humanity, citing systemic barriers that Black people have “faced their whole lifetime that play a factor into this.”
The most recognized is the 1930s practice known as redlining, which cut off lending in neighborhoods the federal government deemed “risky” — primarily areas with non-white, low-income residents As a result, Black Americans and other people of color could not secure funding to fix up their homes, purchase new ones or sell them, cutting them off from participation in what is otherwise America’s most widely shared form of wealth building.
The Fair Housing Act of 1968 made it illegal to deny someone housing based on their race or other protected categories. Despite the law, however, people of color continue to be denied mortgages at higher rates than their white counterparts.
“The No. 1 way in America that folks build wealth remains homeownership. And that is a big stepping-off point for all the other aspects of folks being able to participate in life,” Henning said. “If you don’t have the opportunity to get a home loan in the first place, then you’re kind of cut out of that.”
Additionally, because of tax benefits, owning a home is often less expensive than renting. And the wealth accumulated through a home is generational: Children of homeowners are more likely to own a home than those of renters.
One Economy goal: Increase Black homeownership by 2%
Since the release of the One Economy report four years ago, the group has been setting goals to lift up Black residents in its five key indicators.
It wants to nearly double Des Moines area’s Black homeownership to 4.6% by 2023 by engaging with lenders, expanding education for potential buyers, and building a Black real estate professional network.
While it’s the focus of the group, “we hope all lenders take on that cause,” said Stephanie Murphy, executive director of Neighborhood Finance Corp., a nonprofit that provides home mortgage loans without income limits in targeted areas throughout Polk County. In 2020, Neighborhood Finance Corp. loaned to 14 Black borrowers, accounting for 6% of its home loans for the year.
“Our lending mirrors the population that we’re lending to,” Murphy said, “though we hope that we can increase that further with some intentionality.”
Her organization recently secured a $1.27 million grant that it hopes to use toward improving lending for Black applicants, though fair housing laws may restrict targeting loans to a specific racial group. Neighborhood Finance Corp. also recently hired a loan originator who focuses on diversity, equity and inclusion.
Habitat for Humanity has received U.S. Department of Housing and Urban Development approval to provide financial and pre-purchaser counseling and hopes to provide that service to the broader public, not just the clients it builds houses for, Henning said. It also has formed a task force to find ways to help lenders understand how to tailor their products to low-income borrowers.
For its part, the American Bankers Association says it is encouraging banks to explore new ways to evaluate credit, including an applicant’s rent and bill payment history. That process is available now, but requires manual study, can be cumbersome for the lender, “and does not yield the scale necessary to meaningfully increase access to homeownership,” according to the association.
Jones said she hopes state and federal leaders use this newly released data to change regulations for Black applicants, particularly by lowering the credit score requirements for historically marginalized communities. She also hopes to see more Black Iowans enter the real estate field in roles including Realtor, loan originator, appraiser and home inspector.
“I feel like my Black peers need people who look like them to show up,” she said.
Finally, Jones said she wants to see more education on homeownership and building credit for youth in schools, as well as mental health support for Black Iowans dealing with the ups and downs of purchasing — or being shut out of purchasing — a home.
“My mission is Black and brown home ownership,” she said. “I feel like it’s a cause I can serve.”
The top 5 U.S. metros in which Black applicants are denied home loans at a higher rate than their white peers
- Fayetteville-Springdale-Rogers, Arkansas — 3.1 times more likely
- Dayton-Kettering, Ohio — 2.9
- Oklahoma City, Oklahoma — 2.8
- Richmond, Virginia — 2.7
- Albuquerque, New Mexico — 2.6
- Des Moines-West Des Moines, Iowa — 2.6
- Stockton, California — 2.6