The $412 million, 43,000-member Self-Help Federal Credit Union of Oakland, Calif., the federally chartered counterpart to the state-chartered Self-Help Credit Union in Durham, N.C., has purchased $141 million in Chicago mortgage loans from the FDIC.
The deposit insurer assumed the loans of the failed Second Federal Savings & Loan Association, a roughly $200 million financial institution that the Comptroller of the Currency closed in July of this year.
The Hinsdale Bank & Trust Company in Hinsdale, Ill., accepted Second Federal's depositors and roughly $14 million in assets, mostly cash. The bank did not accept any of Second Federal's loans.
Self-Help FCU paid $59 million for the loans and assumed the loans as part of a partnership with The Resurrection Project, a community development organization in Chicago that had raised the alarm about the possible eventual fate of the loans. Resurrection had feared that FDIC would sell the loans to the highest bidder which might, in turn, increase foreclosures on the lenders.
“The mission of both TRP and Self-Help is to build healthier communities,” said Raul I. Raymundo, Resurrection’s CEO. “But to do so we need to also thwart the deterioration of our neighborhoods. With the acquisition of these loans, we will be helping hundreds of families remain in their homes. The disorder created by foreclosure hampers economic growth.”
Self-Help CEO Martin Eakes added “We plan to aggressively assist struggling homeowners to avoid foreclosures. Too many families have been hurt by the recession and as partners, TRP and Self Help are poised to restore confidence and assist working families build wealth once again.” The Resurrection/Self-Help partnership has received widespread support from local businesses, elected officials and community leaders, according to the organization's announcement.
It quoted Cook County Commissioner Jesus Garcia, who represents the area where most of the Second Federal loans are concentrated, as saying, “Their partnership will save taxpayers millions in the ripple effects of foreclosures, such as a depreciation of property values, an increase in violent crimes, and a destabilization of the family unit.” Self-Help and TRP also said they plan to set up a local community development credit union which will offer payday loan alternatives and other mainstream financial services.
David Beck, director of Policy and Media for Self-Help Credit Union, said about 20% of the loan portfolio is “nonperforming” which he characterized as either delinquent to some degree or as approaching foreclosure. None of the loans purchased were actually in foreclosure, he said.
One of the credit unions first goals would be to see if it could work with borrowers to keep the loans current or bring them current if they had become delinquent. Beck did not know how many of the loans might qualify for a modification or might have already had a modification that failed. He was confident, however, that the loans were not those dating back to before the housing finance crisis.
“These are loans from an area that has been hit very hard by the recession,” he said.