By Corey Williams
Associated Press
DETROIT (AP) — City officials, bank executives and foundation leaders collaborating on a new mortgage program in Detroit expect it to make it easier for people to buy homes in the city.
Under the Detroit Home Mortgage initiative, an initial loan will cover the appraised value of a house, while a second mortgage of up to $75,000 will fill the gap between the appraised value and the sale price of the home and renovation costs.
Low home values and federal lending guidelines that have not clearly allowed banks to make loans above appraisal values have slowed Detroit in its efforts to rebuild its population after decades of decline and the city’s exit from bankruptcy more than a year ago.
“This is a game-changer for Detroit,” Mayor Mike Duggan said last Thursday in announcing the program at a home for sale on the city’s northwest side. “This initiative is critical to rebuilding Detroit’s neighborhoods. With an opportunity to get a home mortgage, qualifying homeowners and homebuyers have a real opportunity to buy and renovate a house in the city and make it a home.”
The program resulted from discussions between the city, state, the Obama administration, several banks, and the Ford and Kresge foundations. The discussions included meetings with the Clinton Global Initiative, which brings together business, philanthropic, nonprofit and government leaders to develop solutions encouraging economic growth.
“Each home contributes to the revitalization of the block,” Kresge Foundation Chief Executive Rip Rapson said.
Kresge is putting $6 million into a $40 million pool to guarantee the second mortgages.
About 1.8 million people lived in Detroit in the 1950s, but the city’s population now is close to 690,000. The foreclosure crisis hit Detroit especially hard, as thousands of families lost their homes.
Home values in the city have not kept pace with rising values in the surrounding suburbs, Duggan said.
Of the 3,000 houses sold in Detroit in 2015, only about 500 buyers could get mortgages, he said. Duggan said the new program means “1,000 mortgages that would not have been made before.”
“Anybody who wants to buy a house in the city of Detroit, if you’ve got a steady job and good credit score ... you can get a mortgage regardless of the appraisal,” Duggan said. “You can buy that house. You can have ownership.”
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