November 14, 2015
Printed from chicagobusiness.com
Eight years ago, as the foreclosure crisis was looming, ShoreBank mounted an ambitious campaign to refinance thousands of mortgages for borrowers at risk of losing their homes.
Just a few years later, losses from those loans helped sink the community lender, which had a national reputation for its work in low-income city neighborhoods.
Now, five years after successor Urban Partnership Bank took over ShoreBank's loans and pledged to continue its mission, Chicago-based UPB wants to excise a substantial portion of its ShoreBank legacy. It's seeking to sell 1,561 mainly residential loans originated by ShoreBank, including many of the mortgages stemming from its predecessor's crisis-era rescue effort.
The loan package totals $154 million, with most of it dedicated to single-family homes. The average loan size is less than $99,000.
The move marks a dramatic shift for UPB and carries risks for the South and West Side neighborhoods where most of those properties are located. A buyer of the loans may not have the same desire or incentive to keep struggling borrowers in their homes as did UPB.
“The fact that the (offering) is so (geographically) concentrated is impactful,” says Rob Grossinger, president of Washington, D.C.-based nonprofit National Community Stabilization Trust, which helps reclaim distressed properties in low-income urban areas. “It's important.”
Bulk loan sales containing hundreds and sometimes 2,000 or more mortgages aren't uncommon, but typically the properties are spread over a much wider area than the old ShoreBank loans, he says. If those properties and borrowers aren't handled sensitively, it could lead to foreclosures and abandonment of neglected properties, further damaging neighborhoods that still are struggling to emerge from the recession.