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Small Chicago Bank Giving Mortgages in Low-Income Area

July 5, 1986

CHICAGO (AP) _ One of Chicago’s most deteriorated neighborhoods is bouncing back, thanks to a bank staffed by ″hard-headed do-gooders″ who are determined to transform urban decay into middle-class prosperity.

South Shore Bank’s pioneering loan strategy is producing better housing, better tenants and a higher standard of living for the South Shore neighborhood, a community of about 80,000 people eight miles south of downtown Chicago along Lake Michigan.

″They have ulterior motives; they want people to move in and bank with them,″ said Keith Banks, 64, who has used financing from South Shore to purchase and rehabilitate five apartment buildings.

What’s innovative is that the bank is giving mortgage loans for multiple- family buildings to entrepreneurs in a mostly black area of the city, where traditional institutions often feared to tread.

″We have been willing to invest in some categories of real estate loans that are relatively unconventional,″ said Mary Houghton, executive vice president at South Shore

″They are hard-headed do-gooders,″ said Dr. Richard Taub, a University of Chicago social science professor who is writing a book about the bank and its holding company, Illinois Neighborhood Development Corp.

Large banks often avoid giving mortgages in depressed areas because it is difficult to assess whether people can afford to repay the loans, Ms. Houghton said.

Banks, a retired employee of Commonwealth Edison Co., owns 125 apartment units in the area. He said he kept getting turned down for loans when he approached other banks.

″They were not interested in these communities,″ he said. ″I have no idea why. Maybe it’s because we’re black. We’ve been laborers for the last 50 or 60 years. The biggest problems for years were food and shelter. We had no money or education for entrepreneurship.″

But he found South Shore willing to do business, and, he said, ″In the last 10 years, since I’ve been associated with them, I’ve become almost a wealthy man.″

In recent years, a number of other banks have also begun lending in the community. But Vincent Lane, president of Urban Services Realty and Management Group, a developer in the area, said that for many years ″South Shore was the only game in town.″

South Shore made loans ″without the predetermined biases against minorities″ other banks often seemend to exhibit, he said.

Jim Bringley, a loan officer at South Shore, said the bank emphasizes loans to entrepreneurs, rather than to people who want to buy single family homes.

″We give money to people who want to buy 6-, 12- or 24-unit apartment buildings and fix them up,″ he said. ″... Ma and Pa types can’t make the loans to buy a bad building.″

Ms. Houghton also said the bank will not lend money for buying an apartment complex unless there are plans to rehabilitate it. Exceptions are made only if the building is in good shape.

″We will not finance a straight acquisition,″ she said. ″We want long- term local resident investors, not slumlords.″

Bringley said that under the bank’s approach, ″the whole quality of the neighborhood gets better. You get higher rents and better tenants.″

A group of investors, including several philanthropic foundations, formed the holding company to purchase the bank for $3.2 million in 1973.

Among the 31 owners are the Ford Foundation, MacArthur Foundation, Mott Foundation, Allstate Insurance Co., Amoco Neighborhood Development Co., Episcopal Church of the USA and Cummins Engine Foundation.

Before the bank was purchased, the South Shore neighborhood had switched from nearly all-white in the 1950s to 98 percent black by the early 1970s, and banks and other businesses had fled.

″Banks are self-fulfilling prophets,″ said Gale Cincotta, executive director of the National Training and Information Center, a consumer group that lobbies banks to lend more to inner cities. ″If they say a neighborhood is bad, they won’t invest. Then if people can’t get money, the neighborhood actually becomes bad.″

Since 1977, when the bank began making apartment building loans on a regular basis, South Shore has financed the rehabilitation of 200 buildings, Ms. Houghton said.

Bringley said the bank currently has assets of about $120 million, with $70 million in outstanding loans. Mortgage and home improvement loans total $35 million, including $20 million for apartment buildings.

Bank officials say the mortgage default rate is less than 2 percent.

The bank lost more than $200,000 in 1974, but has never been in the red since. Profits in 1985 reached an all-time high of $1 million, Ms. Houghton said.

The bank, which has about 100 employees, plans to open a branch soon in the depressed Austin neighborhood on Chicago’s far west side, she said.

Taub, whose upcoming book on the holding company, ″Community Capitalism and Economic Development,″ said the two other corporations of the holding company have also played major roles in helping the community develop.

They are City Lands, a commercial real estate developer, and the not-for- profit Neighborhood Institute, which is involved in job training, job placement and other social efforts.

As a result of these efforts, the South Shore neighborhood is in ″incredibly better shape today″ than in 1973, he said.

″There are large numbers of people who see the South Shore as a good investment and a good place to live,″ Taub said.

End Adv Weekend Editions July 5-6

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