Mayor Mike Duggan.

DETROIT — Mayor Mike Duggan announced a new “game-changing” initiative Thursday morning to assist new and existing homeowners who receive low mortgages because of depreciated appraisal values.

Homeowners and prospective home buyers who could not previously borrow money from a bank to repair or buy a house in Detroit due to depreciated appraisal values of neighboring houses can now explore options and apply for the Detroit Home Mortgage program.

The initiative was formed in association with Huntington Bank, Flagstar Bank, Talmer Bank and Trust, Liberty Bank, Kresge Foundation and other local banks and organizations to close the appraisal gap in Detroit.

“This is a game-changer for Detroit,” Duggan said. “We are confident that Detroit Home Mortgage will increase homeownership in the city of Detroit. This initiative is critical to rebuilding Detroit’s neighborhoods. With an opportunity to get a home mortgage, qualifying homeowners and homebuyers have a real opportunity to buy and renovate a house in the city and make it a home.”

Duggan said last year only 500 homebuyers could get mortgages in Detroit. He added that the bank’s reluctance to lend has nothing to do with the borrowers’ incomes or credit scores, but is a limit of the appraised values of nearby homes with similar sale prices.

Similar houses on the city’s outskirts are much less expensive to buy compared to Detroit, forcing families to rent the homes or accumulate large debts. For example, a person can rent a home in Detroit for $1,000 per month, while buying the house costs $750 a month between the mortgage and taxes.

Qualified borrowers could receive a first mortgage for the appraised value and a second one up to $75,000 to cover the cost difference between the assessed value and sales price and renovation costs.

Duggan said that the federal lending guidelines degrade surrounding property values and the curtails the city’s comeback.

The appraisal gap is left over from the 2008 housing crisis and is structured to “look backwards,” Duggan said.

The mayor said the Detroit Home Mortgage program aims to approve 1,000 qualified homeowners for mortgages that they would not have been able to get before.

Gov. Snyder praised the program in a press release, stating the initiative is an example of what happens when the public and private sectors come together to help neighborhoods thrive.

“This is a creative solution to revitalize Detroit’s neighborhoods,” said Steve Steinour, chairman, president and CEO of Huntington Bank. “By partnering with the city, local banks are joining together to offer loans that resolve the challenge of making homes livable by funding both purchase and necessary repairs, without the problem of financing exceeding the home’s worth.”

Detroit Home Mortgage borrowers must complete classes in homebuyer education and the financial risks involved in borrowing more than the appraised value of a home.