Judge Rules Mortgage Giants Exempt From City Vacant Properties Ordinance
By aaroncynic in News on Aug 27, 2013 1:30PM
Photo credit: Eric Allix Rogers
A federal judge ruled in favor of mortgage giants Fannie Mae and Freddie Mac last week in a lawsuit the Federal Housing Finance Authority filed to receive an exemption from Chicago’s vacant building ordinance. The law, which took effect in late 2011, requires both owners and mortgagees maintain certain property standards—like securing the property and lawn maintenance—and pay a $500 registration fee for vacant properties.
According to the Wall Street Journal, U.S. District Court Judge Thomas Durkin ruled the City doesn’t have the authority to make laws on a federal agency. Judge Durkin wrote the ordinance is an “impermissible tax on the federal government,” in that revenues from the registration fee aren’t tied to a city service.
Though Durkin sided with the FHFA, he also reminded the mortgage giants of their responsibilities. The Chicago Tribune reports Durkin wrote in his opinion:
“Fannie and Freddie's own guidelines, not unlike the city's, require it to maintain the properties in a manner to preserve their value. This is consistent with their overall mandate to preserve the assets of Fannie and Freddie—a field into which the city of Chicago may not encroach.”
The ruling could affect cities nationwide. More than 1,000 municipalities have similar laws on the books, and the ruling could prompt the FHFA to file similar suits in the future. Katie Buitrago, a senior policy associate at the Woodstock Institute told WBEZ:
“It’s great that FHFA has their own standards, but there needs to be an external accountability system in place, like a city’s vacant buildings ordinance, to make sure that there’s consequences when they don’t live up to their own standards.”
Combined, the two mortgage giants own some 258,000 loans secured by properties in Chicago. The City is currently reviewing its options, which include appealing the decision. In a statement, the Mayor’s office said:
“This ruling will do little to stop the Mayor's aggressive efforts to ensure that banks are responsible neighbors across Chicago, particularly in communities that have been hardest hit by the foreclosure crises. Vacant properties are a challenge for neighborhoods and a financial burden for the City, and while we are disappointed in the court's decision, we will continue to hold financial institutions responsible for maintaining properties while protecting our residents and communities from the dangers vacant properties create.”