The Federal Housing Finance Agency, the agency charged with overseeing Fannie Mae and Freddie Mac, has filed a lawsuit in the U.S. District Court for the Northern District of Illinois against the city of Chicago to prevent enforcement of Chicago’s vacant property ordinance. The agency states that the City’s effort to hold mortgagees responsible for the upkeep of troubled, vacant properties stuck in the foreclosure process infringes on the FHFA’s sole authority to supervise the secondary mortgage market enterprises.
“With the foreclosure process taking longer to complete, it is critical to hold mortgagees accountable for vacant properties stuck in the foreclosure process,” said Tom Feltner, vice president of Woodstock Institute. “Ensuring that these vacant properties are safe and secure preserves the value of the home and protects both the lender and neighboring homeowners from the problems associated with foreclosure-related vacancy.”
The ordinance was recently revised to reflect many of the changes that Chicago region mortgage servicers believed were necessary to move forward with the enforcement of the ordinance.
In the recent report entitled, Left Behind: Troubled Foreclosed Properties and Servicer Accountability in Chicago, Woodstock identified nearly 1,900 vacant properties in some stage of foreclosure in Chicago alone. In cases where responsibility for the stewardship of the property is unclear, this status suggests a lack of effective ownership, oversight, and accountability for the maintenance and security of these properties. Woodstock also identified the significant burden these types of properties place on municipalities and estimated that the costs of dealing with these properties in building court, securing the properties, responding to criminal activity, and potentially demolishing these properties was approximately $36 million.