Thank you to President Clinton and the entire CGI family for this opportunity. I would like to invite Cliff Kellogg – the head of the White House Detroit Task Force - Frank Altman, the president of the Community Reinvestment Fund – and Arthur Jemison – the City of Detroit’s Director of Housing and Redevelopment – to join me on the stage.
In Detroit Mayor Mike Duggan’s early days in office, he asked the public to assess his job performance solely based on the Detroit’s population rise or fall. What he found was that home ownership was on a downward slide. And among the barriers thwarting potential homeowners was a particularly pernicious one – the inability of so many interested buyers to qualify for a mortgage.
These are people who could qualify for mortgages in almost any other community. But in Detroit low appraisals coupled with a low-quality housing stock – houses that could be homes with some renovations and repairs − had banks shying away from lending. In 2014, only 12 percent of all home purchases in the city were made with a mortgage.
So the mayor came to CGI with an idea last year to assemble all the key stakeholders with a mandate that no one would leave until a viable solution was found. So representatives from the city – including the Mayor, the Kresge and Ford Foundations, banks that lend actively in Detroit, and others – including Frank and Cliff – held a marathon session at CGI’s annual meeting until we had hammered out the framework for a path breaking, innovative solution that tapped the strengths of each of the players.
That framework is now a reality – Our commitment: Detroit Home Mortgage. We probably should really call it the CGI America Accords.
Through Detroit Home Mortgage, qualified borrowers can receive mortgage financing well above appraised values, including up to $75,000 for needed renovations. The program couples a conventional first mortgage with a second mortgage and, so long as the borrower can afford to make the payments, the two mortgages combined can exceed the original appraised value of the home. The second mortgage effectively closes the appraisal gap that was preventing qualified borrowers – both long-time residents and newer ones – from purchasing a home, renovating a home, staying here.
In less than one year from that locked-door session at CGI, Detroit Home Mortgage has raised $28 million for this second mortgage fund with a $6 million guarantee from Kresge – our largest social investment ever. The State of Michigan invested $6 million in the fund, and other investors have conditionally approved an additional $8 million. The Ford Foundation and Kresge contributed grant money to enable the Community Reinvestment Fund and its partners to arrange the financing packages and manage the program. Six community intermediaries stepped in to counsel potential home buyers.
In the relatively few months since our launch, the five originating banks have responded to more than 400 leads. Currently, 28 loan applications are in the approval process and many others have been pre-approved and are actively looking for a home. Both Huntington Bank and Talmer Bank and Trust are poised to close the first Detroit Home Mortgages at the end of this month. Our goal is to close hundreds of loans over the course of the year.
With each of those loans, we set in motion the fly-wheel of increasing residential valuations and heightened home ownership.
So Mr. President, we are grateful for your support, and for the CGI team for helping to bring the right people together to help the people of Detroit. It is exciting to watch Detroit add layer by the layer the essential building blocks of a return to health and vitality.
(Read more about the Detroit Home Mortgage program.)