Comerica Bank will invest up to $5 million in Detroit Home Mortgage, which provides second mortgages to buyers so they can get past the city's appraisal gap problem.
Detroit Home Mortgage was created in 2016 because properties were appraising at a lower value than the sale and renovation price, leaving the buyer unable to obtain financing, according to the Detroit Home Mortgage website.
As a result, less than 20% of home purchases in the city during 2016 were financed with a mortgage, according to statistics from Crain's Detroit Business cited by Comerica in the press release.
Through Detroit Home Mortgage, purchasers apply for a loan with a participating bank. Once the appraisal is determined, the bank will split the loan into two mortgages with low, fixed rates. The first mortgage will be for 96.5% of the appraised value. The second mortgage will be for the amount above the appraised value up to $75,000.
The second mortgage comes from a second-lien fund provided by the program's participants and other donors. Detroit Home Mortgage is managed by the Community Reinvestment Fund USA.
In the future, Comerica will become a participating lender in the program. There are five banks currently that are a part of the program: Chemical Bank, Flagstar Bank, Huntington National Bank, Independent Bank and Liberty Bank.
"It's been inspiring to watch the transformation of downtown Detroit over the past several years," Michael Ritchie, president of Comerica Bank-Michigan, said in the press release. "Detroit Home Mortgage is helping to push that revitalization out into the neighborhoods.