Detroit Mayor Mike Duggan announced Thursday a new mortgage program that he hopes will address one of the city’s great ironies: empty, abandoned houses everywhere that nobody can buy because they are so cheap and so broken that banks won't lend on them.

Last year, just 10 percent of Detroit homebuyers got a mortgage; the rest had to pay cash to make deals happen.

The challenge? Most properties require significant work to be habitable, but the cost of fixing them up is often more than what they are valued. After all, the median home price in Detroit was just $26,000 in February, according to RealtyTrac, an Irvine, Calif.-based company that sells real estate data.

“We know that the desire to renovate these houses and rebuild our neighborhoods is there,” Duggan said at a news conference. “What we haven’t had is enough lenders willing to take a chance on our city to show what’s possible.”

The new program, dubbed the Detroit Neighborhood Initiative, enlisted Bank of America and two nonprofits, Boston-based Neighborhood Assistance Corporation of America and Detroit-based Opportunity Resource Fund, to create a loan that can get around federal regulations that prohibit, in most cases, lending more than a home is worth.

"Mortgage rules are formulaic," said Matt Elliot, Michigan market president for Bank of America. They don't consider extenuating market conditions like the ones that exist in Detroit.

The new program will write mortgages up to 110 percent of a home's value – or up to 150 percent if purchased through the Detroit Land Bank Authority home auctions. Additionally, the new loans offer favorable terms and are available to anyone who plans to live in the house and who doesn't already own a property. Here are a few of the highlights:

0 percent down

No closing costs

No fees

No maximum income

Credit score is not considered

Below market fixed rates (currently 3.5 percent for a 30-year loan and 2.875 percent for 15 year)

Ability to buy down the interest rates to near 0 percent

Loans of up to $200,000

“This is character-based lending,” said Bruce Marks, the founder and CEO of NACA, likening it to the VA loans that were made to vets after World War II. “It is a fully documented loan, but we look at income and ability to pay, not credit scores. … This is a model for restabilizing neighborhoods.”

NACA offers these types of mortgages in about 40 states and is funded by $10 billion from Bank of America and $3 billion from Citigroup Inc. However, the 150 percent loan-to-value mortgages are only being issued in Detroit.

"We can’t have a sustainable renaissance without Detroit’s neighborhoods," Elliot said. "And we can only be as successful as Detroit is successful.”

Technically, the NACA-originated mortgage is underwritten by Bank of America and can be worth up to 100 percent of a home’s completed value. The Opportunity Resource Fund then issues a second mortgage for the remaining need, up to 110 percent or 150 percent of the home's value.

Here's how that math works: If a borrower purchases a home through the land bank that would be worth $100,000 when renovations are completed, the borrower could take out a loan of up to $150,000. NACA would write the mortgage for the first $100,000, while the Opportunity Resource Fund would handle the remaining $50,000.

“Public private partnerships are what make this work,” said Christi Coady Narayanan, CEO of the fund. “We’ve always believed that investing in Detroit – for the long term – is good for the community, its residents and businesses.”

For Duggan, the financing just makes sense because rents in Detroit are so much higher than the cost of ownership. “You could be paying $800 a month in rent,” he said, “but you can’t get a mortgage for a similar property when the payments would only be $400.”

That’s why Marks doesn't see these loans as risky despite buyers not putting any skin in the game up front. Instead, he sees these types of loans as a model for mortgage lending because they are based on affordability and counseling customers, not high interest and overlending.

Marks said NACA’s default rate is less than 1 percent nationwide.

To find out more about the program, visit naca.com. The first homebuyer’s workshop, which is required to participate, is scheduled for April 25 at Pure Word Missionary Baptist Church at 20011 Grand River Ave.