Detroit home repair loan program tops expectations, but only third of applicants accepted

Christine Ferretti
The Detroit News
Don Garner shows some of the repairs needed at the Detroit house he purchased last year and was approved for a loan to fix  up through the Detroit 0% Interest Home Repair Loan Program.

Detroit — Creators of an interest-free home repair loan program are declaring it a success for Detroit even though fewer than a third of all applicants have been approved.

Since it launched three years ago, the Detroit 0% Interest Home Repair Loan Program has fielded nearly 2,500 applications for the loans ranging from $5,000 to $25,000. Of the 863 approved loans, 446 projects worth $8.5 million are complete.

An additional 280 borrowers chose to withdraw for various reasons, including disagreements with contractors over pricing or opting against taking on new debt.

But the outcome, officials say, is better than originally projected for an offering in the city that's historically been hard to come by.

“It exceeded our expectations," said Arthur Jemison, the city's services and infrastructure chief, noting a 36 percent loan approval rate that's more than tripled initial estimations. "It brought people who had credit to the front door of a program where they might not have access to credit otherwise."

The city-led partnership with Bank of America and the nonprofit Detroit Local Initiatives Support Corp. was rolled out by Detroit Mayor Mike Duggan in spring 2015 with the goal of stabilizing neighborhoods. 

According to officials, more than 130 other homes remain under construction or in the pipeline for repairs.

Eligible Detroit residents who own and occupy single-family homes can access the interest-free loans for repairs ranging from window, roof and gutter replacements to bathroom and kitchen remodeling, electrical and plumbing upgrades. 

The program, which gives borrowers up to 10 years for repayment, is geared toward Detroit residents with an income less than $39,700 for individuals or $56,700 for families of four, according to its website. It's also open to those who don't qualify based on income but live in eligible target areas.

Detroit Local Initiatives Support administers the program, coordinating with a dozen neighborhood "intake centers" throughout the city to help residents apply.

Once an applicant goes through the underwriting process and is approved for a loan, the project is handed off to the city for an analysis of its scope, bidding and selection of a city-approved contractor. 

Sandra Cavette of Detroit has made various repairs and upgrades to her Detroit condo through an interest-free loan program for eligible Detroit residents.

For Sandra Cavette, the program helped speed a much-needed revamp of her historic condominium in the city's New Center area.

The 72-year-old was granted $24,500 last spring to remodel two bathrooms and a kitchen outfitted with 30-year-old appliances that she said were nearly on life support. The work wrapped up in August.

Sandra Cavette of Detroit shows new tile work in her condo, made possible by the 0% Home Repair Loan Program.

"I honestly have never had an interest-free loan of any kind, and it made it manageable," said Cavette, a retired Detroit health department worker on a fixed-income. "A lot of people do not know about the program. The word needs to get out."

Bank of America has supplied $4 million toward the loan program that it helped craft as a means of keeping more residents in their homes, said Tiffany Douglas, Bank of America's local market executive for Detroit. 

"People want to do better for their home and their neighborhood and are not looking simply for a handout," she said. "We certainly do not want someone to walk away from their home because of a leaky roof or an unstable foundation. They just need a little help."

Overall, 1,263 applicants have been declined for assistance, primarily due to credit scores or debt-to-income ratios that exceed the program guidelines, said Damon Thompson, who acts as the home repair coordinator for Detroit Local Initiatives Support.

Rejected loan applicants are referred back to housing counselors to resolve denials at no cost. 

"Roughly 20 percent of the approvals (in the program) are applicants who resubmitted an application after receiving the free assistance," Thompson noted. 

The minimum credit score required was 560. The average of those accepted into the program was 727, Jemison noted. 

"The idea that they have credit quality and are not being served is even more evidence of why this program is important," he said.

But at least one applicant contends the program led to "just a bunch of broken promises."

Don Garner says he essentially became a homeowner who is homeless as he waited for the city to select a contractor for his three-bedroom brick bungalow, purchased last year and approved for an interest-free home repair loan. Due to the delay, he has been sleeping in his car, seen here.

Don Garner says he's essentially become a homeowner who is homeless as he waits for work to begin on his three-bedroom brick bungalow.

The 50-year-old Detroit resident qualified last summer for an interest-free loan to repair the property he purchased in the Detroit Land Bank Authority home auction in the fall of 2017.

Garner said he's spent the last few months sleeping in his Oldsmobile Alero in the driveway after the initial contractor selected for his project bowed out in October amid a disagreement over proposed costs that he argued were inflated.

An electric box and a sewage line represent some of the repairs needed on Don Garner's Detroit house, purchased last year.

The wait for having the work rebid was lengthy, he said. A winner was finally selected in late January after The Detroit News inquired about the holdups. Garner, who was approved for $25,000 in loan funding, said he hopes the rehabilitation will get underway this month and that it will make his house livable.  

"I made the conscious choice to just tough it out and stay in my car. It was better than going to a shelter," said Garner, who gets by on a $750-a-monthly disability stipend after enduring a kidney transplant and triple bypass. "What I would tell people is be very cautious in this program. I know in my case it hasn't been working because it should not have taken this long."

Thompson stressed that Garner's predicament is a rarity. He's among 10 applicants  referred to the program by the compliance department of the Detroit Land Bank Authority.

It's a newer allowance for the program, Thompson said, that's resulted in only half of the 10 — including Garner — being pre-approved. 

"He is one of our first cases to see if the program can work," said Thompson, who confirmed in late January that a new scope of services with a cost estimate was written and bid out again for Garner's project.

Under the program, the city receives the bids and provides them to the homeowner.

The applicants then have the ability to select on their own or have the city to do the selection based on what's "the lowest or most reasonable," said Donald Rencher, director of Detroit's Housing and Revitalization Department.

A construction management firm contracted by the city works with the contractor to set a timeline for the work to be completed. It's monitored by a chief city inspector.

No contractors have been let go from the program, but there have been some "put on probation that haven't met the expectations that we want to see," he said. 

In cases when contractors and homeowners can't reach an agreement, "we try to bid it out again and have another contractor take the project," he said.

The rate of complaints is about 5 percent and most, Rencher said, are associated with timing, not work quality.

Sandra Cavette of Detroit has made various repairs and upgrades to her Detroit condo through the 0% Home Repair Loan Program for eligible Detroit residents.

And several of the 34 contractors in the program are on suspension over long-standing "paperwork issues" tied to expired licenses and certifications, officials said. 

No contractors are currently suspended for performance issues.

For typical projects, the time from application to closing is about 120 days. The warranty on the work is good for 18 months.

It went smoothly for east side resident Betty Henderson, who secured an $11,000 loan for a new roof, windows, a garage door and electrical upgrades. 

"It just seemed as if it was a godsend," she said. "A lot of the people in Detroit stay in their homes in wobbly shape. Anything that's going to help people is very necessary."

One Detroit Credit Union is a partner contracted to facilitate the loans provided with funding from Bank of America and the city, through federal block grant dollars.

President and CEO Hank Hubbard said his bank has originated about 240 loans worth $4.4 million since the program's inception.

"I do think that the program has got a lot of value," Hubbard said. "Is it perfection? No, but it's giving access to a lot of people who wouldn't otherwise have it, and they are not paying predatory rates."

Tahirih Ziegler, executive director of Detroit Local Initiatives Support, said there were struggles early on with meeting the demands of the thousands seeking information and trying to apply. 

Officials continue to track denials, withdrawals and other factors that have impacted the program.

"We're doing an evaluation now to take away all the best lessons from this initiative," Jemison said. "One of the lessons is there is pent-up demand for longtime homeowners who are eligible for credit not getting access to it, and us making sure that happens."