Do You Have an Adjustable Rate Mortgage? Here Are Some Important Changes

I recently received a call from a reader asking what is likely to happen with his adjustable rate mortgage (ARM) that is tied to the LIBOR Index. LIBOR may be just another acronym that you’ve skipped over in the sea of real estate acronyms, but if you have an ARM read on, because the “index” (LIBOR) that is used to set your interest rate is being phased out after 2021. I asked Jaxzann Riggs, owner of The Mortgage Network what borrowers should expect.

LIBOR, or the London Interbank Offered Rate, was a benchmark interest rate index used for decades by lenders all around the world, as a predictor of future loan costs. To break it down, LIBOR was calculated based on estimates of the average interest rate a group of leading global banks would charge each other for short-term loans. Lenders then used that information (referred to as the “index”) to calculate the rate you would pay for your mortgage as the interest rate on your ARM was “adjusted.”

During higher-priced housing markets, many homeowners chose an adjustable rate mortgage because they preferred the lower monthly payments that an ARM offered. Most ARMs created in the past 20 years were tied to the LIBOR benchmark, which is why this index has played an important role in how much interest you pay on your mortgage if you have an ARM.

The LIBOR index, as I said, is being phased out. Introduced in 1986 by the British Bankers’ Association, the LIBOR index quickly became the default standard interest rate used by both local and international lenders. Despite wide acceptance, LIBOR was based on self-reporting and good faith estimations, which made it very susceptible to manipulation and fraud. Scheming and collusion within the LIBOR index were brought to light in 2012, causing distrust, tighter regulations, and the beginnings of a plan to create a new system. 

Introducing… SOFR, the Secured Overnight Financing Rate (pronounced “so-far”).

Effective January 3, 2022, the mortgage industry began to adopt SOFR. SOFR is a benchmark rate that uses the rates banks are charged for their overnight transactions. This system helps deter manipulation and subjectivity, as it is based on transactions secured by U.S. Treasuries.

What does this mean for you?

Absolutely nothing if you have a fixed-rate mortgage. However, if you have an adjustable rate mortgage, you might see changes in your upcoming bills. ARMs typically adjust annually and as LIBOR-based ARMs hit reset, the new SOFR index is likely to be used to calculate your new rate. When SOFR ARMs reset, they will be adjusted every six months, the reason being that the 1-year LIBOR looks forward, while SOFR looks backward. LIBOR reflects where interest rates are expected to go in the next 12 months, while SOFR reflects an average of short-term rates during a recent 30-day period. 

Jaxzann told me that LIBOR and SOFR rates should be close to each other. “It won’t be identical but within the margin of a homeowner’s perspective, it should be a minimally different.” 

I agree that the switch from LIBOR to SOFR is going to have a relatively limited effect on most borrowers, but as with all things, knowl-edge is power and consumers who have an ARM should contact their loan servicers to discuss the changes that they can expect.

So, take a deep breath and remember, you are not alone in this! Reach out to Jaxzann Riggs  at 303-990-2992 to discuss the implications that SOFR will have on your existing ARM or the future benefits that you might enjoy by having an ARM.

Interest-Only Loans Make a Comeback. Is One Right for You?  

Interest-only mortgages are making a comeback. Having a full appreciation of how interest-only loans work is key to determining whether this type of loan is the best fit for you. I spoke to Jaxzann Riggs of The Mortgage Network to break down these loans for me.

Well, let’s first answer the question: What is an interest-only mortgage? 

An interest-only mortgage allows you to pay only the interest due on the loan during the first 10 years of the loan – making your monthly payments lower when you first start making mortgage payments.

How do interest-only mortgages work?

A fully amortizing loan requires you pay an amount toward the interest and the loan balance (called the principal) for a set term, usually 15, 20, or 30 years. Lenders often refer to this as the P&I payment (principal and interest).

Interest-only mortgages, however, allow you to make monthly payments that equal only the interest due on the loan, for the first 10 years of the loan. At the beginning of the 11th year, you will begin paying both, the interest due on the loan and a portion of the loan balance.

For example, if you take out a $500,000 interest-only fixed rate mortgage at 4%, with an interest only period of 10 years and a fully amortizing period of 20 years, you’d have to pay about $1666 per month for the first 10 years. When the interest-only period ends, you will still owe the entire $500,000 and your monthly payment amount will almost double to about $3,029 with the inclusion of both principal and interest payments. 

What are the Pros and Cons of an interest-only mortgage?

According to Business Insider, there are many pros and cons to think about. 

Pros:

The initial monthly payments are usually lower: Since you’re only making payments towards interest the first several years, your monthly payments are lower compared to some other loans. 

May help you afford a pricier home: You may be able to borrow a larger sum of money because of the lower interest-only payments during the introductory period. 

Increase to your cash flow: Lower monthly payments can leave you with extra dollars in your budget. You can use that money to put towards other investments, home improvements, or you can start paying down the principal early.

Cons:

You won’t build equity in the home: With an interest-only loan, you aren’t building equity until you begin making payments towards the principal.

You can lose existing equity gained from your payment: If the value of your home declines, this may cancel out any equity you had from your down payment, making it difficult to refinance or sell.

Low payments are temporary: Your low monthly payment won’t last forever — when the interest-only period ends, your payments will increase significantly.

Interest rates can go up: Interest-only loans usually come with variable interest rates. If rates rise, so will the amount of interest you pay on your mortgage.

There are many homebuyers that may benefit from an interest-only mortgage. People who aren’t planning to stay in their home long term can take advantage of the lower monthly payments for several years, and then sell their house before the higher monthly payments kick in. Buyers who are just starting in their careers may appreciate the lower payments while they are making an entry level salary. If your finances are strong and you’re not worried about building equity, this may be a great option for you.

As with any large financial commitment, it’s important for all prospective buyers to seek expert advice. Reach out to Jaxzann Riggs at 303-990-2992 with any questions.

It is important to note, however, that once the initial interest-only term ends, you’d continue making payments toward the loan with both principal and interest included.

It Takes Many ‘Players’ on a Mortgage Lending Team to Get You to the Closing Table  

By JIM SMITH, Realtor®

The government’s supervision of lenders has changed the way that home loans are made. Once you select your lender, you will be interacting with multiple people. Understanding who the “players” are is important.

I asked Jaxzann Riggs, owner of The Mortgage Network to describe those players..

The Loan Originator/Loan Officer

Sometimes called a “loan originator” or “loan officer” (LO) this is your team manager. Your LO will typically be your first contact with the lender. The LO decides if your income, assets, and credit will allow you to obtain the financing you need. The LO will be an educator and your advocate. He/she will manage the overall progress of the application, making sure that deadlines agreed upon by you and the seller are honored.

The Processor

The processor is the player tending to your loan application as it winds its way from application to closing. Your processor will request documentation from you that supports the information that you and the LO have put into the application for the loan. Their job is to organize your documents so that they paint a clear picture of your ability to repay the loan. The loan processor is the go-between between the borrower and underwriter.

The Appraiser 

The appraiser will create a report that assesses the home’s market value to ensure that the amount of money requested for the loan will be acceptable to FNMA or FHLMC. The appraiser confirms the home’s dimensions, examines amenities, and evaluates the overall condition. He/she examines the records of comparable properties, ideally ones in the same neighborhood that have sold recently. Based on this information, the appraiser arrives at an opinion of how much your property would sell for if you put it on the market. This opinion assists the underwriter, along with your income, assets, and credit history in deciding how much it will lend you and on what terms.

The Underwriter

Think of the underwriter as the final word. FNMA and FHLMC are quasi-governmental agencies that set underwriting standards which lenders must follow. After reviewing your credit history, assets, the size of the loan, and the appraisal of the home, it is the underwriter who will decide whether your application meets government standards and either approve or decline the application. If they decide that your credit profile or application does not meet FNMA/FHLMC standards, they may deny your mortgage or require a larger down payment. Underwriters have discretion in the approval decision and, while they are the “gatekeeper” for the lender, they typically will look for ways to approve the loan.

The Closer

While not obvious, there are two “closers” working on your loan team. The title company’s closer must coordinate with the lender’s closer to reconcile the numbers associated with the loan and real estate transaction. The title closer will be presenting the lender’s final documents for your signature on the day of closing. The closing package includes the final loan application, loan estimate and closing disclosure, title insurance documents, deed of trust, bill of sale, affidavit of title, tax documents, etc. While they start their work at the beginning of the transaction, their work is not finished until all the documents that you sign at closing have been recorded with the county.

The Most Valuable Player (MVP)

The most important player is YOU. Your LO and Loan Processor will not ask you for documentation unless they know that it will be required by the underwriter. The more responsive you are to their requests, the faster the loan will be approved and the lower your stress level will be during the process.

Do you have other questions about the mortgage process? I recommend calling Jaxzann at 303-990-2992.

Pressure is Building for Potential Home Buyers: Why Now May Be the Best Time to Buy  

Roughly 6.5 million homebuyers have taken advantage of ridiculously low interest rates since the beginning of 2021. Low interest rates have allowed them to become first-time homebuyers, to move up to their dream home or to downsize.

Many would-be home purchasers have watched this ‘boom’ from the sidelines and decided that now may not be the best time to buy. Bidding wars and the need to make split second buying decisions over the last few months have reduced their appetite for home buying. It might be time to reconsider that decision.

I asked Jaxzann Riggs about the wisdom of “waiting” to make a move, and the following is based on our conversation.

Rental rates fell in 2020, but nothing could be further from the truth in 2021. While accounts vary, some leasing agents (according to ApartmentList.com) report that rental rates could increase as much as 32.4% in the next 12 months and stats indicate that they are up a shocking 16.5% in the first eight months of 2021.

As rental prices spike, potential homeowners should do a little mortgage math.

A potential homeowner who is paying $2,600 per month for rent, would be able to own a home valued at around $475,000. With a 3% down payment of around $14,279, this renter could turn into a homeowner, allowing them to enjoy the associated tax benefits and the opportunity for appreciation on their new property

Housing inventory is increasing and with the threat posed by rising rental rates, and rising interest rates, there is no better time than today to explore home buying options.

During the Covid-19 pandemic, the Federal Reserve supported lending to households, consumers, and small businesses to stimulate the economy. The Federal Reserve recently signaled that it plans to begin reducing the support it has been providing to the U.S. economy. Long term fixed mortgage rates are driven by the overall economy and inflation, but they are directly influenced by Fed policy.

Once the Federal Reserve starts to slow the pace of bond purchases, mortgage rates will move up. Fed officials indicated that they would begin “tapering” the asset-buying activities that it began last year as early as November. After the announcement, mortgage rates did in fact, show a rising trend. For someone with a $500,000 home loan, a 4-basis point jump will cost them $115 more per month and $41,400.44 more over the life of the loan on a 30-year, fixed-rate mortgage.

Mortgage rates are hovering near 3% and demand remains strong but higher rates are clearly on the horizon. Remember our potential renter? As rates rise, a monthly rent of $2,600 would instead result in a $410,000 house (vs. $475,000), if interest rates move from 3% to 4.5%

Even more incentive to potential homeowners is housing inventory. The inventory of active listings on the market rose by a record monthly amount (according to Denver Metro Association of Realtors). Some potential homebuyers that I am working with report they are waiting for prices to cool off to make offers, but even if that does occur, they are unlikely to see lower monthly house payments because any potential savings in purchase price will be lost to rising interest rates.

Future home buyers are not the only ones affected by higher interest rates. For homeowners who have been procrastinating with their refinance application, now is the time to call a lender. Jaxzann Riggs and I are standing by to make the process as simple as possible.”

If you have lending questions, you can reach Jaxzann, who is the owner of The Mortgage Network, at (303) 990-2992.

It’s Suddenly Much Easier to Qualify for a Refinance of Your Home Mortgage

Refinancing has been all the buzz this year. Many homeowners have taken advantage of record-low rates to refinance their homes. Unfortunately, lower-income borrowers, especially those who lost income streams due to Covid-19, were unable to refinance because of income requirements. According to the Federal Housing Finance Agency (FHFA), over two million families could not refinance in 2020 when they might have benefited from it. As of June 5, 2021, this is no longer the case. Lower-income homeowners may now potentially save hundreds of dollars per month on their mortgage under a government initiative called “RefiNow.”

I spoke with Jaxzann Riggs of The Mortgage Network to learn about this program.

We have all heard the term “refinancing,” but you may not know why someone might consider refinancing. Homeowners choose to refinance their mortgage for different reasons. Refinancing your home could allow you to secure a lower interest rate, which lowers monthly payments, to shorten the duration of your mortgage, to switch to a fixed-rate mortgage, or to access equity.

While refinancing may sound ideal for your situation, the process and guidelines post-COVID have been quite strict and restrictive. One important factor in qualifying for refinancing is your debt-to-income (DTI) ratio. Your DTI is the percentage of your gross monthly income that you pay each month towards your debt and other obligations, including mortgage, minimum credit card payments, car loans, and student loans. Traditional loans require DTI to be under a certain threshold to refinance — typically under a maximum of 44%. Many people, especially service industry workers and small business owners, lost their jobs and sources of income during the pandemic, and the regulation regarding DTI was an obstacle to refinancing. RefiNow may be able to change that.

RefiNow, Fannie Mae’s new refinance option, makes it easier for homeowners earning at or below 80% of their area median income (AMI) to refinance at a lower interest rate to reduce their monthly payment. This new program is designed to lower the barriers that keep low-income borrowers from refinancing, which have historically resulted in those borrowers refinancing at a slower pace than higher-income borrowers. With RefiNow, you are allowed to have a DTI of up to 65% (instead of 44%) and you will be given an appraisal credit of up to $500. The new program does not just benefit homeowners, it helps lenders because it improves the probability that homeowners who may have been struggling to make their current payments will be able to make future payments, resulting in fewer pandemic related foreclosures. Don’t despair if your loan is owned by Freddie Mac (FHLMC). Freddie is slated to offer a similar loan program in the next few weeks.

To qualify for RefiNow, you must have:

> A Fannie Mae-backed mortgage secured by a one-unit, principal residence. Unsure? Go to https://www.KnowYourOptions.com/loanlookup

> A current income at or below 80% of the Area Median Income (AMI) This varies by census tract, but your lender can look this up for you.

> Not have missed a mortgage payment in the past six months, and no more than one missed mortgage payment in the past 12 months.

> A debt-to-income ratio of 65% or less, and a minimum 620 FICO score (minimum 660 FICO score for manufactured homes).

> A reduction of at least $50 per month on the new loan and you may not access any of your equity.

If you are not sure if a RefiNow loan is right for you, reach out to Jaxzann Riggs at (303) 990-2992 with any questions and to discuss your best options.

What Are Your Options When Approaching the End of Mortgage Forbearance?

As unemployment surged during the early months of the pandemic, many homeowners found themselves taking advantage of forbearance programs offered by their mortgage servicer. At the end of February, roughly 2.5 million homeowners in the U.S. were still in forbearance plans. I sat down with Jaxzann Riggs, owner of The Mortgage Network in Denver, to learn about what options are available for those who are approaching the deadline for exiting forbearance.

For homeowners who may still be experiencing financial difficulties, extending their forbearance plan may be a possibility. However, an extension will not happen automatically. If you are in a forbearance plan that is close to expiring, you should reach out to the company that services your mortgage to see if you are eligible to extend forbearance.

Whether you qualify for a forbearance extension depends largely on your loan type and when you originally entered forbearance. If your loan is backed by Fannie Mae (FNMA) or Freddie Mac (FHLMC), you must have entered into your forbearance plan by February 28, 2021. If your loan is backed by the FHA, you must have entered forbearance by June 30, 2020. Once forbearance ends, the best course of action depends largely on your personal circumstance and loan type.

Borrowers with a FNMA or FHLMC loan can opt to pay the “past-due” amount in a lump sum and have their loan reinstated if they are in a financial position to do so. For those who have loans through Fannie and Freddie but are not able to pay off their forbearance amount immediately, there are several options. If you can afford a few hundred dollars on top of your typically monthly payment amount, you should speak with your servicer about entering a repayment plan for a specified time frame.

For borrowers who have found themselves in a different financial position than they were prior to the pandemic, putting several hundred additional dollars a month towards a mortgage may not be possible. In that case, you may be able to enter payment deferral, in which you resume your typical monthly payments and the past due amount is added on to the end of the loan. You can also talk to your loan servicer about a loan modification, in which the servicer agrees to lower the interest rate, forgive a portion of the principal, or otherwise adjust the loan. Note, however, that a loan modification will negatively impact your credit history.

Borrowers with an FHA loan have several options, the most straightforward being to simply resume monthly payments. The FHA considers the past due forbearance amount as an interest free second loan, meaning that the payments are essentially deferred until the end of your loan term. If you are not in a position to resume your full monthly payments, you should speak with your servicer about a loan modification in which your interest rate will be lowered and loan term extended.

For those with a VA loan, a repayment plan or loan modification may be the best course of action. Although the VA does allow deferment as an option, it does not require that its loan servicers provide it.  For borrowers with a nonconforming loan (jumbo) there are no specific guidelines regarding forbearance. Some loan servicers may have chosen to offer forbearance, but they are not held to the same guidelines as other loan types.

Navigating your options as forbearance comes to an end can be tricky, but you do not have to face it alone. You may find it helpful to speak with a housing counselor before calling your loan servicer. The U.S. Department of Housing and Urban Development, or HUD, offers a list of approved counselors by state on their website.

And for any mortgage scenarios you may have, as always, I recommend calling Jaxzann Riggs of The Mortgage Network at 303-990-2992.

Division of Real Estate Warns Homeowners About ‘Equity Skimming’ Schemes

By now, we should all be wary of people offering to “help” us financially, usually via the internet or email, but also by phone.  As the saying goes, “If it sounds too good to be true, it probably is.”

Last week the Colorado Division of Real Estate (DRE) issued a warning about scammers cheating homeowners out of their home’s equity on the pretext of helping them pay HOA liens on their home.

Yes, an HOA can place a lien on your home for failing to pay your HOA assessments or fines, and an HOA lien takes priority even over the lien of your mortgage lender.

It is possible for an HOA to foreclose on your $600,000 home because of unpaid dues or fines, no matter how small. But if you can’t pay, what do you do? Those liens and subsequent foreclosure actions become public records, making you an easy-to-find target for a scammer wanting to “help” you.

Here’s a link to the full DRE warning. It describes several scamming scenarios. According to the DRE’s warning, those scenarios “can leave a homeowner losing their property, becoming a renter in their own home, having their credit rating severely damaged, and having the possibility that the lender may pursue a deficiency judgment against them if the property is foreclosed upon, as well as the HOA pursuing a personal judgment against them for unpaid HOA dues.”

Homeowners are urged to look for the following red flags:

>  Anyone wanting you to act fast with a quick-fix to your financial difficulties.

>  Promises to resolve your financial problems and to leave your cares behind.

>  Someone wanting you to transfer your ownership in the property to them.

>  Anyone asking you to sign a power of attorney for them to act on your behalf.

> Proposing that you’ll be a tenant in the home that you now own.

>  Someone telling you that there is no need to consult with an attorney, accountant, real estate broker, lender or anyone else.

Feel free to contact me if you find yourself in this or a similar situation. My intention is not to convince you to list your home with me. I just want to give you my own layman’s feedback on what others may have told you, and I can, if appropriate, refer you to a trusted real estate attorney. First, however, read that DRE warning, which has lots of useful information and links for reporting suspected scams or getting other advice.

And, as I like to say, remember that “Google is your friend.”  When contacted by someone you suspect could be a scammer, do a web search for the person and/or company and/or email address and/or phone number. Also, we have a special app called “Forewarn,” only available to licensed Realtors like myself, where I can instantly search by name or phone number. My broker associates and I use that app to check out people who want to do business with us, instantly learning their age, properties owned, bankruptcies or liens, criminal charges, and even cars they own.  I’m happy to do such a search for you, too.

Lastly, I’d like to put in a good word for my cell carrier, T-Mobile.  My previous cell carrier was AT&T, which didn’t provide Caller ID on people not in my contact list, but I do get Caller ID with T-Mobile. If a number does not have a name associated with it, I let it go into voice-mail, and those callers rarely leave a message, suggesting, I believe, that it was a “spoofed” number by a solicitor or scammer. Thank you, T-Mobile! I’m wasting a lot less time than I used to on answering unwanted calls.

‘Equity Sharing’ Concept Not as Smart as a Home Equity Line of Credit

A reader brought to my attention a company called Noah (formerly Patch Homes) which offers an alternative to the Home Equity Line of Credit (HELOC). What they offer is a way of tapping into your home’s equity for needed cash in return for a percentage of your home’s equity — reportedly between 15 and 40%. You don’t pay for this “loan.” Rather, Noah shares in your home’s appreciation (or loss of value) when you sell.

While I don’t consider Noah’s offer a scam, I think it should only be considered as a last resort. In the long run, a HELOC is a much better way to access the equity in your home, and credit unions are the best places to secure such a loan, in my experience. Here’s a third-party review of Noah’s “equity sharing” concept.

The Good, the Bad, and the Ugly About Mortgage Loan Forbearance

A record number of homeowners entered into a forbearance plan for their mortgage over the past year amidst the Covid-19 pandemic. Forbearance — an option that allows borrowers to pause payments on their mortgage for a limited amount of time due to an unforeseen hardship — served as a veritable lifeline for many people who found themselves unexpectedly out of work and unable to pay their mortgage as COVID restrictions tightened.

As more time passes, however, it is apparent that issues stemming from forbearance are starting to surface. While this is not an immediate cause for panic if your own mortgage has been in forbearance, being aware of issues that others are facing will help to keep you prepared for any trouble that arises.

For that reason, I had a Zoom meeting this week with Jaxzann Riggs, owner of The Mortgage Network in Denver, to learn more about complications that forbearance may bring about.

When the CARES Act was initially passed back in March 2020, it included a provision for mortgage forbearance, making it relatively easy for millions of borrowers with government backed mortgages to enter into such a program. Fannie Mae and Freddie Mac, the two largest servicers of government backed loans, subsequently issued an extensive list of guidelines for lenders in response to Covid-specific forbearance.

One of the most crucial guidelines involved credit score reporting. An account in for-bearance must continue to be reported as current, provided it was current prior to the forbearance plan. Due to the vast number of people who entered into forbearance in such a short time period, it is especially important to monitor your credit score — but that is not necessarily the end of the story.

Some borrowers who were previously in forbearance that are now applying for new loans are discovering that their issue does not lie with the credit reporting bureaus themselves but with the underwriting on their new loan. Underwriters, who are primarily responsible for qualifying a borrower for a loan from a specific lender, have a significant amount of discretion when it comes to approving an application. The consequence of this is that borrowers who would otherwise be well qualified to purchase — with high credit scores, steady employment, and a significant down payment — may find themselves struggling to obtain the loan they are seeking if they previously had a loan in forbearance. Although Fannie’s and Freddie’s guidelines include specifics for underwriting, the sometimes unfortunate reality is that these guidelines can be interpreted differently by different underwriters.

If you had a loan in forbearance sometime this past year and are now considering a new purchase or refinance, you should not immediately despair. Maintaining meticulous records that indicate when you initially applied for forbearance and being able to produce all communications with your current lender to the new lender are essential. If you have entered the repayment phase of the loan it is critical that the repayment agreement is followed exactly as written.

Because forbearance was originally intended to help those that had a loss of income or employment due to COVID, underwriters are scrutinizing employment history and the likelihood of it continuing for all borrowers. Borrowers that did not have any change in employment status during the pandemic but who entered into a forbearance agreement should be prepared to outline for the new lender their motivations for entering forbearance and to additionally explain how they will be able to avoid forbearance in the future. This is a bit ironic, in that lenders strongly encouraged many to utilize the options afforded them under the CARES Act. If you have questions about how forbearance may impact your future lending, I recommend, as always, that you consult Jaxzann Riggs of The Mortgage Network. You can reach her anytime on her cell phone, 303-990-2992.

We Can All Learn From Studying Racism’s Role in the Evolution of Local Zoning

No one can deny that racism has played a role in housing, as it has in virtually every aspect of society since the founding of our country. Like me, however, I bet you’ll learn some things you didn’t know from this study of racism in zoning written by my friend, Don Cameron. While this study is of the City of Golden, it would be fair to say that it reflects the evolution of zoning throughout the country. Click here for Don’s full report with artwork, photos and footnotes.

A History of Golden Zoning

Golden Colorado circa 2020 has zoning that is best described as Euclidean, named after a court case in Euclid, Ohio. Euclidean zoning prescribes various areas in town to have various uses by right, and other uses that can be obtained by special permit.

Prior to that court case in Ohio, it was not clear that the government had a role in regulating land use, and individual landowners could pretty much do what they wanted. But in 1922 the Supreme Court ruled that municipalities had the right to regulate land use.

Golden’s history of zoning was initially one of mutual agreement between the town’s settlers and the city in laying out streets, creating easements for streets and utilities, but generally leaving land development to the individual owners. This sort of planning resulted in building on some lots that don’t meet current lot minimums, a variety of housing types and a mix of commercial and residential uses in some areas.

From 1954 onward, though, this mix of uses did not fit neatly into the districts that were created. Because of the mix of use types that already existed, some areas were zoned as commercial even though they had a large proportion of housing that was built as single family homes.

Other areas were zoned for higher density in anticipation of growth that in some cases still has not come. Later developments were zoned planned use development (PUD), with uses identified that were specified on the plats and may have included mixed use.

In parallel to this history there were also restrictive housing policies that were in place in Jefferson County, including Golden. Specifically, redlining was a practice put in place at the federal level by the Home Owners Loan Corporation in 1938.

Redlining defined areas where federally backed loans could  and could not be obtained. Golden itself had no redlining map, but let’s look at Golden’s history.

From the 1880s and into the 1920s property owners could pretty much do what they wanted. There were no explicit covenants preventing Blacks or non-Caucasians from buying or building in Golden. However, the 1920s also saw our government filled with KKK members and sympathizers and a reduction in Black (Negro at the time) residents in Jefferson County.

While Blacks in the county and city were few in number in the 1920s, nonetheless the KKK burned crosses on South Table Mountain’s Castle Rock formation above where Coors’ tourist parking lot is now.

There was a measurable racist element in the population, and there was not a welcoming environment. The plats were already written, and the residential land use defined, so there was little “need” to be racist in zoning because there was no demand (that is, few black people lived in Golden).

This “lack of need for racist/exclusionary zoning” changed, however, in the late 1930s amid the boom leading up to World War II.

Again, land use at the time was mostly protecting individual property rights. While the Supreme Court had ruled that cities could control land use, there was a very hands-off approach to this. So the “law” was on the side of homeowners.

Starting in the 1920s and into the 1940s it was common for people in many areas of Jefferson County to say they’d only sell their property to those of the Caucasian or other non-Negro races.

The courts backed up this right because they were protecting homeowners’ use of their land and had no civic duty to prevent this discrimination. Blacks were excluded from being shown properties in these restrictive areas, and. if they tried to purchase them, they might have it taken away soon after.

In 1942 there was the case of a Black family trying to build a new development and victory garden near what is now Boyd Street. The family said they would put in all the utilities required to government code. Still, white citizens of Golden protested. The following article appeared in the October 22, 1942, edition of the Golden Transcript:

Citizens Protest to City Council

    A large number of citizens appeared before the city council Wednesday evening, and stated that a group of colored people had taken possession of the land recently purchased by them east of the Clark’s Garden addition, within the city limits of Golden, and were apparently staking out some proposed building sites. These citizens protested to the city council the starting of a colored settlement in Golden.

It was pointed out in the meeting that the sale of the property had been approved by the county court on September 24, and that the purchase price for the 30-acre craft was $1,500, not including some legal and abstract of title cost…

The article went on to say that at the mayor’s direction, a citizen’s committee was formed to negotiate with the FHA to not allow this sale to go through and not fund it, claiming the cost of extending utilities would be burdensome. One of the citizens appointed to this committee was Casper Bussert.

Golden had few areas that were not platted, but when a new plat was put in for the Sunshine Park Addition in 1944, by this same Casper Bussert, he added a deed restriction limiting ownership to Caucasians.

While this would seem to violate the 14th Amendment, the Supreme Court had already ruled that the 14th Amendment was about states not discriminating based on race, but was silent on individuals’ ability to discriminate. However, in the late 1940s the NAACP and others started pushing back on these covenants using the following argument: If a black person were to buy a restricted property and then the state were to enforce the covenant, that would constitute a violation of the 14th Amendment, which eliminated slavery and gave Blacks the right to buy and own property.

In 1948 the Supreme Court ruled that these types of covenants were no longer enforceable. Almost immediately, and certainly by 1950 one sees a complete change to the covenants created in Golden and surrounding areas. Rather than explicitly restricting an area to whites, there were new restrictions excluding those without access to capital. Enter classism.

Even though redlining was no longer permitted, there were (and are) limits on Blacks’ ability to get loans on favorable terms. Some loans, for example, were interest only for the term of the loan, so one did not gain any equity until the loan term ended. Failure to make even one payment could result in “owners” losing their homes with no equity.

When new restrictions were put in place by the FHA, they targeted people without access to loans. An additional clause that targeted families with kids was the Nuisance Clause, which limited activities based on the opinion of the architectural control committee.

R1 (single-family) zoning, as laid out in the city code, shows a direct evolution from racist covenants to restrictive covenants to exclusionary zoning, all of which kept housing out of the hands of Blacks.

The legacy of this is the noticeable and persistent wealth gap in this country. Blacks, by being excluded from homeownership, have not been able to build wealth, escape blighted areas, or enjoy integrated schools. Because school funding is typically based on property taxes, school districts are  self-segregated by wealth and thereby race.

In summary, Golden’s history follows the narrative of the country with respect to race. Land planning and zoning may be silent on race, but the effect of both planning and zoning continues to exhibit, in its end result, the heritage of systemic racism, to the detriment of Blacks in particular.

Email response received from Michael Nosler:

Jim, as always, your article was very interesting and timely as we must be reminded of our country’s  systemic racist policies that contribute to the discord we experience today.  I have a couple of other examples.  First, the FHA was the driver for much of the single family homes constructed in suburbia during the 50s and 60s.  It’s underwriting policies in the early days, mandated that “the neighborhood be homogeneous (segregated), with that homogeneity preferably assured through racist restrictive covenants, for which the FHA helpfully supplied forms.” Michael Carliner, Development of Federal Homeownership Policy, Housing Policy Debate9,no.2(1998)at 299-321.  As quoted in Concrete Economics by Cohen and DeLong 2016 at p.96.  In addition, I’ve read, but cannot remember the source, that the VA lending policies were similar.  As a consequence, black GIs returning home, could only get loans for properties located in black communities(inner city residences) and thus were not able to build up the equity in their homes like the white GIs who were able to buy new homes on the large lots in suburbia.

This “homogenous neighborhood” requirement in federal lending practices prevented the mixing of the races in modern  America, contributing to the racial divide we experience to this day.