An abandoned and dilapidated home listed on the auction block during the Wayne County tax foreclosures auction of almost 9,000 properties in Detroit, Michigan, is seen next to a well kept occupied home October 22, 2009. The tax foreclosure auction stood as one of the most ambitious one-stop attempts to sell of urban property since the real-estate market collapse. Picture taken October 22, 2009.  REUTERS/Rebecca Cook (UNITED STATES BUSINESS) - RTXQ09B
An abandoned and dilapidated home listed on the auction block during the Wayne County tax foreclosures auction of almost 9,000 properties in Detroit, Michigan, is seen next to a well kept occupied home October 22, 2009. The tax foreclosure auction stood as one of the most ambitious one-stop attempts to sell of urban property since the real-estate market collapse. Picture taken October 22, 2009. REUTERS/Rebecca Cook (UNITED STATES BUSINESS) - RTXQ09B

Julian Spector, an editorial fellow at CityLab, details a bold lending program aimed at increasing homeownership in Detroit.

The city program comes at a time when traditional lending policies have made it difficult for potential borrowers to buy an old house and fix it up.

Detroit Home Mortgage offers buyers a mortgage for the cost of a house, plus a second mortgage to cover up to $75,000 of repairs. The goal is to deliver 1,000 of those renovation loans over the next three years, at a fixed rate of 5% interest with no bank fees. Mayor Mike Duggan hopes this will spur homeownership in the city and kickstart a housing market that’s been languishing since the city’s financial troubles began. Spector writes:

On its surface, the plan flies in the face of a core tenet of financial responsibility: don’t borrow more for your home than it’s worth. But the housing market in Detroit is such an anomaly that the traditional rules don’t always apply.

Read more >