Vacant Property Rules Under Fire
The vacant property ordinance imposed by the City of Chicago demonstrates a lack of vision of the larger foreclosure crisis picture.Under the ordinance backed by Mayor Rahm Emanuel, mortgage holders are required to pay a $500.00 vacant property registration fee either 30 days after a property becomes vacant or 60 days after the loan goes into default, whichever is later.
This registration requirement puts the servicer/lender/GSEs directly in the line of fire to be responsible for securing and maintaining properties for which they do not yet hold title.
While the ordinance may be well intentioned, and meant to stem the tide of vacant blighted properties in the city, it is ill conceived.
Lenders and servicers are on the top of the heap to voice their disapproval of this “jam it down our throat” technique of dealing with the responsibility for distressed assets.
Only recently the FHFA took it a step further and filed a lawsuit against the City of Chicago, taking the position that the ordinance encroaches upon their role as the supervisor of the GSEs by mandating how they handle vacant properties where the GSEs are the designated mortgagee. Lenders and servicers are anxiously sitting in the wings to see how this all plays out, as it will have a direct bearing on their own “ownership or quasi-ownership” responsibilities.
Currently, Fannie and Freddie have approximately 258,000 properties under their purview in the City of Chicago. In the event properties in this population become or are vacant, the potential outlay of cash to the City may be substantial, adding to the burden of these taxpayer supported entities.
If that was not a strong enough argument on its own, the lawsuit also claims that because the GSEs are under the supervision of the FHFA, a federal agency, the ordinance is preempted by federal law.
If the City of Chicago was really trying to send a lasting message to lenders/servicers to buck up and be responsible citizens and contribute to the economic recovery of their City, they have sadly failed on many fronts with this particular ordinance.
Unfortunately, more taxpayer dollars will have to be wasted as this lawsuit lingers on and the opportunity for dialogue leading to a more sustainable solution is lost or further delayed.
Diane Gozza is the executive vice president of business development Integrated Mortgage Solutions, Houston, TX.