DETROIT (AP) — Banks are seeing something in Detroit that few once believed existed — opportunity.
Financial institutions seeking reward after risk are extending loan and grant programs into some of the city's less fashionable neighborhoods, where the process of renovating salvageable houses and filling them with families is a necessary step if Detroit is to continue slowing a decades-long population dive.
Obstacles toward that goal include the poor condition of the housing stock, appraisals far below the asking price, shaky personal credit in one of the country's poorest economies and a debt-ridden public school system badly in need of an overhaul.
None of that stopped Keith Baker. In December, the 25-year-old moved into a home on Detroit's northwest side. Baker works for Quicken Loans downtown and wasn't fond of the commute from his apartment in the suburb of Westland. His initial thought was to rent another apartment in Detroit, but the "Rehabbed and Ready" program, which guts and fixes up foreclosed homes to get them back on the market, "seemed too good to refuse," Baker said.
His monthly mortgage is $500.
"I didn't even know about some of the neighborhoods until looking at this program," Baker said. "The program helped by making sure (the house) was live-in ready. It was in excellent condition."
Detroit, as much or more than any other city, had struggled with the decline in U.S. manufacturing and hit rock-bottom when the auto industry nearly went belly-up in 2008. Its population is about 680,000, down about 30 percent from 2000 and a far cry from the 1.2 million in 1980.
The housing recession still lingers here: U.S. Census figure show that between 2010 and 2014, the median value of owner-occupied housing units in the city was just over $45,000; across Michigan, that amount was more than $120,000.
Of the 3,000 houses sold in Detroit in 2015, only about 500 buyers could get mortgages, Mayor Mike Duggan said in February when announcing the $40 million Detroit Home Mortgage initiative. The program will cover the appraised value of a house, while a second mortgage of up to $75,000 will fill the gap between the appraised value and the sale price of the home and renovation costs. The Kresge Foundation is putting $6 million into the $40 million pool to guarantee the second mortgages.
Low home values and federal lending guidelines that have not clearly allowed banks to make loans above appraisal values have slowed Detroit in its efforts to rebuild its population. Presidents of Michigan-based Talmer and Flagstar banks, and Ohio-based Huntington bank spent "dozens and dozens of hours personally working through these details," Duggan said.
Any time you're lending money, "inherently there's risk. A city that has had big time highs and big time lows — there's a little more of a risk," said Rick Hampson, Michigan president for Citizens Bank. "We understand from being here and lending in this market."
"It's the revitalization that is going on here," Hampson said, "and for me, that means just tons of opportunity for a bank to lend to companies."
One thing's clear: Money might go further in Detroit, where the "homes for a median-earning family in Detroit are still between two and three times more affordable compared to the U.S. median family," according to Andres Carbacho-Burgos, a senior economist at Moody's Analytics. And that alone could make Detroit less of a loss concern for lenders.
JPMorgan Chase has chipped in a $6 million loan as an investment in a $65 million apartment and retail development in Brush Park, just north of downtown and near the city's professional sports stadiums.
"We want our investment in the city to be catalytic and encourage others to continue supporting the city's comeback," said Peter Scher, chief of Corporate Responsibility for JPMorgan Chase.