News Column

Cook County Land Bank gets $10 million investment from The PrivateBank

July 24, 2014

By Mary Ellen Podmolik, Chicago Tribune



July 24--The Cook County Land Bank is receiving $10 million from The PrivateBank to acquire and rehab distressed vacant homes and then sell them at cost to consumers.

It represents the first private-sector funding for the land bank, formed 18 months ago with the goal of stabilizing communities by finding new uses for more than 55,000 vacant lots and abandoned houses and other buildings within the county.

Under the agreement, the land bank will use the funds to acquire so-called "zombie properties," those vacant homes that are lingering in the foreclosure process, as well as bank-owned homes, and then a construction management firm will vet and hire contractors to complete the work necessary to make the homes move-in ready.

At the same time, the land bank will work with local housing counseling agencies to identify and help pre-qualify potential buyers who will select a home, wait for it to be rehabbed, and then receive a mortgage from Private Bank or another mortgage lender.

Buyers will have to make a $1,500 deposit as well as a down payment equal to at least 3 percent of the home's post-rehab value. There are no income restrictions but most of the homes will be in economically challenged areas.

"It's unique and it's novel and it will take a lot of work on everyone's part," said Larry Richman, president and CEO of The PrivateBank's holding company PrivateBancorp, Inc. "The risk is always (that) we make these loans and commit these dollars and this doesn't work but we think we'll end up with more homeowners and better communities."

While it is uncertain how many vacant homes ultimately will be involved in the effort, the intent is to tackle several obstacles that have stood in the way of a housing recovery in some areas. Homes in hard-hit communities are sitting in limbo or getting sold for cash to investors who have the deep pockets to fund significant repairs. Many of them are being turned into rental properties.

Meanwhile, people who might want to buy the homes for their own use may be able to afford a mortgage but can't secure the substantial construction loans necessary to make the repairs, and smaller contractors with thinner wallets are locked out from the purchase-rehab market as well.

Investors "are not the highest and best use," said Bridget Gainer, a Cook County commissioner and chairman of the land bank. "There are a lot of attractive homes that require a lot of rehab. The longer it sits, the harder it is to rehab. There is pent-up demand for housing from people who don't have access to cash."

For PrivateBancorp, which had $14.6 billion in assets as of June 30, the funding represents an opportunity to extend its reach beyond its core base of middle-market commercial clients and high-net-worth individuals. "We think if we can get in early and work with the Cook County Land Bank to provide the dollars for the rehab, we think we have a better than likely chance to develop a relationship early with the borrower," Richman said.

The program is being announced Thursday during a workshop for community groups, developers and investors interested in working with the land bank. Outreach efforts in communities will start in the fall, Gainer said.

mepodmolik@tribune.com

Follow @MEPodmolik Follow @chibreakingbiz

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Source: Chicago Tribune (IL)


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