Wednesday, December 14, 2011

FHFA Sues Chicago Over Vacant Home Upkeep Law

In Chicago, lenders are required to maintain vacant homes in foreclosure, such as by keeping lawns mowed and tidy and attending to maintenance issues inside. Lenders found in violation can face daily fines up to $1,000. But the Federal Housing Finance Agency (FHFA) is suing the city of Chicago for its new ordinance, saying the city is overstepping its authority with the mandate.

FHFA, which oversees Fannie Mae and Freddie Mac, says the ordinance is unfair because it “imposes all the costs of home ownership without any of the benefits, such as the right to sell or lease the property,” according to an article in The Wall Street Journal.

The Chicago ordinance has been controversial from the beginning. Lenders have argued that it’s not fair for them to be held liable for upkeeping a property in the middle of the foreclosure process--property, which they say, they haven’t even officially taken ownership of yet.

One research firm estimates that about 1,900 homes are vacant in Chicago, residing in foreclosure limbo, and cost an estimated $36 million in maintenance costs.

"In many cases, by ignoring these properties you're doing a disservice to the community and a disservice to the investor," Tom Feltner, vice president of the Woodstock Institute, told The Wall Street Journal.

Last week, Las Vegas passed a similar ordinance that requires banks to register any homes with a defaulted mortgage and pay a $200 registration fee. Lenders who do not properly maintain the properties then may even face jail time.

Source: “Chicago Sued Over Vacant-Properties Upkeep Fee,” The Wall Street Journal (Dec. 13, 2011)

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