Diamond DeYampert shouldnâ€™t have had trouble getting a mortgage. She earns well above the median income for Wayne County, and has even worked for years in the home-lending industry â€” first as a loan officer and currently as a loan officer trainer for Quicken Loans. In other words, she thoroughly knows the inner workings of the mortgage progress.
But DeYampert faced numerous hurdles, long delays and nearly the loss of her financing altogether before finally closing on a loan to buy a house for $88,000 on Cherrylawn Street near 8 Mile Road.
â€œWeâ€™re good to go, but it’s just been hell to get there,â€ DeYampert said. â€œI know just about everything you need to know from a consumer perspective, but I still went through a lot, hit a lot of roadblocks.â€
DeYampertâ€™s difficulty getting a mortgage is a common issue â€” and it underscores the persistent racial disparities that keep Black people locked out of Detroitâ€™s housing market. In recent years, Detroit shifted from a stronghold of homeownership to a majority renter city, in part due to depressed lending and the disparity in mortgages, which disproportionately have gone to white buyers â€” a phenomenon sometimes called â€œmodern-day redlining.â€ The difficulties of getting a mortgage has had radiating consequences, like trapping buyers in often predatory land contracts.
The onerous, disappointing road to a mortgage
DeYampert, who is Black and grew up in Detroit, eyed the house she wanted to buy back in June 2020. But she was stymied multiple times in the mortgage process.Â
She looked at various programs for first-time buyers, but most didnâ€™t fit her needs.Â The MI Home Loanâ€™s minimum credit score requirement was too high. The banks in the Detroit Home Mortgage program â€” which offers buyers a second loan to cover the common gap between a homeâ€™s appraisal and purchase price â€” either donâ€™t offer loans through the program anymore or didnâ€™t respond to her messages.Â
She decided to get an Federal Housing Administration (FHA) loan, which is backed by the federal government and generally eases the path to a mortgage for people with lower credit scores. DeYampert doesnâ€™t have a poor credit score â€” she says itâ€™s in the low 600s â€” which decreased after she missed some payments on a credit card years ago when her mother was ill.
Even so, she was approved for a mortgage. But the sellers ran into some delays rehabbing the home and the loan timed out after 90 days. DeYampert said that as a result, her credit score dropped seven points even though nothing else about her financial situation changed. When she reapplied, the bank required her to have $8,400 in savings, on top of the $4,200 downpayment.
â€œWho is buying a house for $90,000 and has $12,000 in the bank? No one,â€ she said.
In the end, she switched banks and made a couple of payments, which boosted her credit score just enough to get approved again. From start to finish, it took six months for DeYampert, a salaried professional, to buy a home.
Most arenâ€™t so fortunate. According to the Wall Street Journal, less than a quarter of all home sales in Detroit were financed by mortgages in 2019 â€” the lowest among the 50 largest U.S. cities. Black people got half those mortgages, despite making up 80% of the cityâ€™s population.
‘A lot of work for a little loan’
DeYampert bought the home from Evan Thomas and Keith Bynum, who have been renovating and selling modest homes in and around the Eight Mileâ€“Wyoming area since 2017. Their margins are small â€” nearly all their homes sell for less than $100,000. And itâ€™s made all the more difficult by the reluctance of banks to issue mortgages to their prospective buyers.
â€œAs we work through closings, weâ€™re finding an astronomically high number of barriers,â€ Bynum said. â€œItâ€™s just shocking.â€
When we spoke in December 2020, the couple had six houses under contract, evidence of their solid craftsmanship and design as well as the high demand for housing at that price range in the city. Many of those sales, however, were being held up at various points in the mortgage process. Thatâ€™s often due to buyers having trouble meeting banksâ€™ qualifications, as in DeYampertâ€™s case.
But Thomas and Bynum have been running into another issue: slow response times from loan officers. â€œWe sometimes go five, 10 days before we get a response from a loan offer to a basic message â€” that’s unacceptable,â€ Bynum said. â€œWeâ€™ve filed complaints but it doesn’t seem to matter. They don’t care. Thereâ€™s not enough incentive for them to care.â€
Banks typically pay mortgage brokers an origination fee upon closing of a loan. So when the housing market is busy, as itâ€™s been in Metro Detroit for the past few years, loan officers will tend to prioritize higher mortgages because their commission is bigger. A 2018 study from the Urban Institute found that small-dollar mortgages have higher denial rates for reasons beyond creditworthiness. The authors argue that the lower return on investment for lenders is largely to blame.
Troy Fairbanks, a branch sales manager with Level One Bank who works with a team of mortgage brokers, said that his bank doesnâ€™t have a â€œcutoff pointâ€ for when a loan might be too small to approve, but others might. â€œDo the math,â€ he said. â€œWhy would they do a $60,000 deal and make hardly anything when itâ€™s the same amount of work as a $200,000 deal? Itâ€™s a lot of work for a little loan.â€
Thomas and Bynum showed us finances for seven recent homes sales; the average closing time was over 90 days. According to realtor.com, the national average is 50 days. These delays have stressed their business, which requires them to sell homes to fund their next rehabs.
â€œThe slow close rates have a ripple effect,â€ Bynum said. â€œWithout cash flow, we canâ€™t buy houses. We canâ€™t keep working on certain houses, which means we risk losing buyers. Evan and I have been continuing to float it personally, but it’s a daily struggle to stay on top of the finances.â€
The appraisal gap
Their margins are made even smaller by depressed appraisals of homes in Black neighborhoods. According to a 2018 year report from the Brookings Institution, homes in majority Black neighborhoods nationwide are valued on average 23% less than near-identical homes in majority-white neighborhoods.Â
Thomas and Bynum will often field multiple offers at or above asking price, only for it to appraise for thousands of dollars less â€” one home on Asbury Park appraised for $20,000 lower than the offer. DeYampert agreed to pay $103,000 before her home appraised for $88,000. Since lenders finance mortgages for homesâ€™ appraisal prices, either the buyer has to make a higher down payment or the seller has to lower the price. To keep their sale, Thomas and Bynum are often forced to do the latter.
But they continue rehabbing homes in the same area because they care about their particular subset of clientele: first-time homebuyers who want to be part of the neighborhood.
â€œEvan and Keith could easily sell to a buyer willing to pay more in that neighborhood, like an investor who could flip it or use it as a short-term rental. But theyâ€™re selective,â€ said Shea Hicks-Whitfield, a realtor with Alexander Real Estate Detroit who has worked with Thomas and Bynum for the last year and a half. â€œYou gotta love them for it.â€
But everyone might not be so patient. If the incentives to sell homes for less than $100,000 arenâ€™t there, it can become a self-fulling prophecy. Banks issue fewer mortgages for homes at those values and appraise them for less than theyâ€™re worth, which disincentivizes sellers and rehabbers to invest in those homes, further suppressing inventory.Â
Detroit’s future depends on fixing a broken market
Thomas and Bynum are exploring other options. In two cases for people who couldnâ€™t get a mortgage, theyâ€™ve offered land contracts â€” Thomas and Bynum keep the house notes and the buyers make mortgage payments directly to them. Itâ€™s bad for cash flow, since they donâ€™t get a lump sum payment, but overall have been a great alternative in select cases for both them and the buyers. Theyâ€™re also in talks with Quicken Loans about developing a new loan product that bridges the appraisal gap.
In the meantime, their big goals of making money on real estate has become much more of a passion project.
â€œThis work has changed our perspective a lot,â€ Bynum said. â€œItâ€™s frustrating to see what Detroiters have to go through to get a home, when everywhere else Iâ€™ve lived it’s not like that. Itâ€™s affected people in ways you can’t even fathom â€” the loss of generational wealth, the loss of homeownership.â€
DeYampert closes on her house this week, ending a saga that took months longer than she expected. Sheâ€™s thrilled to finally have the â€œperfectâ€ house. But, she says, until more people like her are able to buy, Detroitâ€™s supposed revitalization is just a mirage.
â€œWhen all of those neighborhoods â€” our Eight Mileâ€“Wyoming, Dexter-Linwood, Barton McFarland, Chandler Park â€” all those neighborhoods populated with people that never left begin to be self-sustaining, then weâ€™ll be a truly revitalized Detroit.â€