The JP Morgan Chase Foundation is giving $5 million to a grant fund that will help Detroiters buy and rehab homes.
It’s part of the global mega-bank’s pledge to donate $100 million to Detroit-boosting causes over the next five years.
JP Morgan has actually given the money to Liberty Bank’s non-profit community development bank. To start with, the program will apply only to some homes up for sale on Detroit’s online auction site, buildingdetroit.org.
That auction has been one of Mayor Mike Duggan’s biggest initiatives, and pretty successful since it launched just a couple of months ago.
But Duggan says he’s noticed investors are buying up half those properties. And it’s become clear that’s because a lot of aspiring Detroit homebuyers can’t get mortgages—and they need help.
“First, there are issues with appraisals,” Duggan says. “Second, banks are very reluctant to loan against a rehab…because if you’re a homeowner and the rehab costs get away from you, what kind of situation are you in?
“So we’re finding that the very people we want to convert from renters to homeownership—people who have jobs, can pay mortgages—can’t get them.”
The program is meant to help fill that gap. Duggan says he hopes “other banks in town will follow JP Morgan’s lead.”
Janis Bowdler, Senior Program Director for the JP Morgan Foundation, says this initial grant gives Liberty a “loan-loss reserve fund” that could end up providing $20 million in total assistance.
“With this money, they can offer more flexible terms, and know that if they experience losses, they’ve got a cushion to buffer those losses,” Bowdler says.
JP Morgan is also contributing $300,000 to start a down payment assistance fund.
Drex Amy, President of the Michigan region for Liberty Bank, says this will allow the bank to provide up to 96% financing, even to people with lower credit scores, on reasonable terms.
“That’s the beauty of it,” Amy says. “They can get market interest rates heretofore not given in Detroit. So we’re excited about that.”
With this grant, JP Morgan has already fulfilled its first $20 million commitment to the city. The remainder has already been disbursed to various blight elimination, job training, and economic growth ventures.