Detroit leaders hope to solve a real estate riddle with some help from banks and non-profits.
The Detroit Home Mortgage program is designed to counter stubbornly low property values in the city.
Those low values mean low assessments — which prevents many otherwise-qualified homebuyers from getting traditional mortgages that cover the full sale price of the home, or include the cost of needed renovations.
Detroit Mayor Mike Duggan says lenders approved just 500 mortgages in the city last year, a fact he called "depressing."
To tackle this "mortgage conundrum," the five banks participating in the program will offer supplementary second mortgages to qualified homebuyers.
“We want to be clear about this. This is not some low-income, subsidized mortgage program,” Duggan said. “This isn’t something for somebody with low credit scores.”
There’s a $40 million pool of money for 1000 supplementary mortgages over the next year, $28 million of which is offered by the participating banks. The rest comes from the state and various non-profit organizations.
The program also came together with the help of the federal government, and one former federal official—President Bill Clinton.
Duggan said he turned to “everyone he knew” for ideas about tackling this problem, including the former president.
Clinton Global Initiative director Donna Shalala says he then used a June 2015 conference to force political, bank, and foundation leaders into a room for a couple days, where they sketched out what became the Detroit Home Mortgage Program.
The result “is a classic example of a great American partnership,” Shalala said.
Duggan says the program is meant as a short-term measure to close the “assessment gap,” in the hope it starts to drive up property values in the longer term.