Dennis Rodkin | Crain’s Chicago Business | March 02, 2023
The city of Chicago is investing in the nation’s two major mortgage-backers, Fannie Mae and Freddie Mac, to generate hundreds of new home loans in the city’s Black and Brown neighborhoods where lending has been neglected in the past.
“We’re investing taxpayers’ dollars in taxpayers,” said city Treasurer Melissa Conyears-Ervin. In recent months, she has directed $7 million of a planned $25 million of city money to a fund that invests in the mortgage-backers, with a stipulation that the money be used for loans on single-family homes on the city’s South and West sides.
The $25 million from the city’s investment portfolio goes into a fund managed by partner R. Seelaus, based in New Jersey, that invests in Fannie Mae and Freddie Mac with targeted goals. In this case, the target is single-family homes in under-mortgaged parts of Chicago. The biggest home-financing disparity between neighborhoods is in single-family homes, according to a 2020 report from the Urban Institute.
Chicago has long had a wide racial gap in homeownership, in part due to lenders neglecting neighborhoods that are largely Black or Latino. While 54% of white households in Chicago are homeowners, Conyears-Ervin said, the rate in the Hispanic community is 43% and in the Black community, 35%.
Homeownership is widely recognized as a means of generating household wealth and stabilizing neighborhoods.
“We want to increase homeownership, and that is what this investment does,” Conyears-Ervin said. “We as a city must invest in our own residents, and that will encourage others to come in and invest.”
When the full $25 million investment is completed in the second quarter, it will represent about 0.25% of the city’s $10 billion investment portfolio, Conyears-Ervin and Craig Slack, Chicago’s deputy treasurer and chief investment officer, said.
Slack added the $25 million investment could lead to 300 or more new mortgages in the neighborhoods, though it’s too soon to say with any precision. With the new funds in hand, Fannie Mae and Freddie Mac will work with mortgage lenders to get the funds out into mortgages.
When the full $25 million investment is completed in the second quarter, it will represent about 0.25% of the city’s $10 billion investment portfolio, Conyears-Ervin and Craig Slack, Chicago’s deputy treasurer and chief investment officer, said.
Slack added the $25 million investment could lead to 300 or more new mortgages in the neighborhoods, though it’s too soon to say with any precision. With the new funds in hand, Fannie Mae and Freddie Mac will work with mortgage lenders to get the funds out into mortgages.
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The money will be “a direct investment in Chicago,” Conyears-Ervin said, “not an investment in mortgages all over the country.”
In a statement, R. Seelaus CEO Annie Seelaus said “having investors target specific geographies and underrepresented groups with their capital will have a profound and lasting impact on the families and neighborhoods of Chicago that need it most.”
The partnership with investment firm R. Seelaus is another part of Conyears-Ervin’s effort to use the city’s investments “to change lives,” she said, “to invest in ourselves.”
In 2021, she helped shepherd a lending equity ordinance through the City Council. It requires banks that are or want to be city depositories, managing some of Chicago’s funds, to publish data on where in the city they make mortgages. The idea was to ensure that the city deposits funds whose lending practices help boost previously overlooked parts of the city.