The Federal Housing Finance Agency and the city of Chicago settled their nearly three-year legal battle over Chicago’s vacant property ordinance that requires mortgagees to register, secure and maintain foreclosed properties, HousingWire reported April 8.
In December 2011, the FHFA sued Chicago after the city instituted the ordinance that requires vacant property mortgage holders to pay a $500 registration fee per property and to adequately maintain the property. Additionally, the ordinance calls for a watchman to be posted at all vacant structures between 4 p.m. and 8 a.m., unless they are secured in another manner approved by the city’s commissioner of buildings.
Fines for violation of the ordinance could be as much as $1,000 per day, HousingWire reported.
The FHFA argued that the Housing and Economic Recovery Act of 2008 overrode the city ordinance, which would have required Fannie Mae and Freddie Mac to secure and maintain more than 250,000 vacant properties in Chicago.
In August 2013, the U.S. District Court for the Northern District of Illinois granted the FHFA’s motion for summary judgment and agreed that Chicago’s ordinance did not apply to foreclosed homes insured by the government-sponsored enterprises.
The two parties reached their final settlement April 3.
Under the deal, Chicago will not require the GSEs to comply with the vacant property ordinance, although they can voluntarily register vacant residences without having to pay the $500 fee. The GSEs also agreed to require mortgage servicers to comply with maintenance guidelines, HousingWire reported.
Registering vacant properties allows the GSEs or their mortgage servicers to receive notifications for public service requests or police activity at the properties, which enables the mortgagees to better maintain the buildings.
“The City’s goal is to achieve a complete registry of vacant buildings in Chicago so that we can effectively address the negative impact of improperly maintained vacant buildings on neighborhoods,” Shannon Breymaier, spokesperson for Chicago’s law department, told HousingWire.
The deal required the FHFA to waive its rights to seek monetary damages or recovery of registration fees or fines previously paid to the city.
The GSEs will work with Chicago to further its Micro Market Recovery Program, a neighborhood stabilization project targeting 13 areas with high foreclosure rates. Chicago has committed $475,000 to the project, which is roughly equal to the FHFA’s estimate of what Fannie and Freddie paid in registration fees prior to the settlement, HousingWire reported.
The GSEs will offer the city the opportunity to buy foreclosed properties in MMRP neighborhoods before listing them for sale publicly.