Detroit mortgage program aims to fix a "broken" system
The city of Detroit’s struggles with recession and bankruptcy have left the local housing market in shambles. For those in and around the Motor City who are renting and want to take the next step and buy a home, there are a number of obstacles in their way. Even if an individual has good credit and a reliable job, many banks are reluctant to lend money in what is viewed as an unstable market.
The Detroit Home Mortgage Initiative aims to change that.
Anna Clark wrote an article for Next City detailing the plans for the new initiative and how it can help “fill the gaps in the city’s housing industry.” Clark joined Stateside to shed some light on the new program.
It's not just that there are far more houses than there are people. It's also that even people who want to buy homes are finding it extraordinarily difficult to get a mortgage
“There has been a market failure of massive proportions in Detroit,” said Clark. “And it’s not just that there are far more houses than there are people. It’s also that even people who want to buy homes are finding it extraordinarily difficult to get a mortgage.”
Clark cites a statistic that in 2014, there were 3,500 single-family homes purchased in Detroit, but only 462 of them actually received a mortgage.
“It’s incredibly frustrating,” said Clark. “This is a city that wants people to come. We have beautiful properties that are just waiting for people to make homes out of them, there’s a lot of excitement about rehab work in Detroit right now … but it’s difficult to even get into the home in the first place. It’s also difficult to get loans to cover the essential rehab costs to make these homes livable.“
According to Clark, the current system is broken and largely favors the wealthy.
If people are buying the properties, they tend to be these out-of-town landlords and speculators or large corporations that are just accumulating property, not people who want to help build neighborhoods
“If people are buying the properties, they tend to be these out-of-town landlords and speculators or large corporations that are just accumulating property, not people who want to help build neighborhoods,” said Clark.
The program is a product of a massive partnership spearheaded by the Clinton Global Initiative, along with Detroit Mayor Mike Duggan, Michigan Gov. Rick Snyder, five regional banks and two national foundations.
"It will offer mortgages at the appraised cost of a home,” said Clark. “The second part of the program is that they will offer loans directly to help cover that gap between the appraised cost and what it costs to actually live in [the house].”
This program is not a low-income housing situation. There are qualifications that applicants have to meet. First, one must have a credit score of 640 and show that they have an adequate income compared to the cost of the home.
Listen to the full interview below to hear more about the initiative and how many people the program is expected to reach.