Impact in Action

Second Federal Savings & Loan: How Impact Investing Helped Preserve a Vital Community Asset

Second Federal Savings and Loan (Second Federal), located in Chicago’s Little Village, began providing banking services to immigrants in 1882. As Little Village's population shifted from European to Latinx immigrants, the number of banks declined. But Second Federal stayed and became a long-standing, trusted financial service in the neighborhood—until the 2008 housing crisis and recession brought with it massive foreclosures. In this story of resilience and impact investing, learn how Self-Help Credit Union (Self-Help) and The Resurrection Project (TRP) worked together with the MacArthur Foundation to preserve the legacy of Second Federal and the assets of the people it had served.

Protecting a Vital Community Service

In early 2012, Second Federal was taken into receivership by the Federal Deposit Insurance Corporation (FDIC) after the foreclosure crisis hit the region. Later that summer, the FDIC held an auction for Second Federal's 3 branch locations, deposits, and mortgage loans. In rapid response to community need, and through an innovative partnership, Self-Help and TRP placed a bid for the overall portfolio, but was ultimately outbid by Wintrust Financial Corp., who acquired the three branches and $161 million in Second Federal deposits on July 20. However, Wintrust opted not to take on the loans—primarily borrowed by Latinx communities in Little Village and surrounding areas. In addition, community members raised concerns about the lack of transparency around the FDIC's choice to transition ownership to Wintrust, given its lesser bid.
With a history of foreclosures, disproportionately affecting Chicago's communities of color and immigrants, TRP, Self-Help, and other Chicago leaders acted quickly to intervene before other bidders in the subsequent auction for Second Federal's loans would leave Latinx communities at risk from predatory lenders. With the support of a $15 million impact investment from the MacArthur Foundation, Self-Help and TRP ultimately went on to purchase Second Federal’s mortgage portfolio —1,100 loans (representing $141 million)— from the FDIC. 
Later that year Wintrust Financial Corp. sold the three branches and deposits to Self-Help and TRP, transitioning ownership back to the local community. Noted Edward J. Wehmer, President and CEO of Wintrust: “We came into Second Federal’s neighborhoods with the intention of serving all the financial needs of the community. After working with a number of community leaders, we came to the conclusion that, for now, those needs are best served by the venture that The Resurrection Project has developed. We are honored to have been the bridge to allow this community the time to build the coalition necessary to take responsibility for Second Federal.”
As of 2013, Second Federal was a full-service division of Self-Help, which operates credit unions in multiple locations across the United States. Self-Help is a group of five nonprofits— including two credit unions, a loan fund, and a research and policy affiliate—dedicated to creating and protecting economic opportunity for all by providing responsible financial services, lending to small businesses and nonprofits, developing real estate, and promoting fair financial practices. Their focus is on those who may be underserved by conventional lenders, including people of color, women, rural residents, and low-wealth families and communities. 


In Context: Communities of Color Continue to Face Financial Exclusion

  • According to the 2012 State of Communities of Color report by the Center for American Progress, Latinos faced a foreclosure rate of 11.9%, vs 9.8% for Blacks and 5% for whites. Approximately 25% of Latinos and African Americans have been foreclosed upon or are struggling with serious delinquency, vs 12% of whites.
  • Overwhelming evidence suggests that discrimination continues to persist in mortgage lending practices, disproportionately affecting Black and Latino populations across the U.S.
  • According to this 2006 study by the Federal Reserve Bank of Chicago and Brookings, immigrants were much less likely to be connected to the financial mainstream, in comparison to individuals born in the U.S.: 63% of immigrant household heads had a checking account, vs 76% of native-born household heads. While 13% of immigrants owned stock, 27% of the native-born Americans owned stock. 

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