The ""Federal Housing Finance Agency"":http://www.fhfa.gov (FHFA) filed a lawsuit in federal court Monday against the city of Chicago contesting a local ordinance that makes lenders liable for the upkeep of vacant homes before they take possession of the title.[IMAGE]
The local statute, which took effect September 18, requires mortgage holders to conduct monthly inspections of properties in default and pay a $500 fee to register any property found to be vacant.
The ordinance also details requirements for maintaining vacant properties registered with the city, such as making repairs, boarding up entrances and windows, cutting grass, shoveling snow, and removing rubbish.
The city may levy fines and penalties of up to $1,000 per day for noncompliance with any provision of the ordinance.
In a statement, FHFA reiterated the argument that the local law mandates payment of the registration fees and compliance with the maintenance requirements even when ""Fannie Mae"":http://www.fanniemae.com and ""Freddie Mac"":http://www.freddiemac.com have not foreclosed upon a property and therefore do not have ownership of the property.[COLUMN_BREAK]
""The ordinance would impose on the Enterprises the responsibilities, but not the benefits, of ownership of vacant property on which they hold mortgages,"" FHFA said.
According to FHFA, Chicago's new vacant property law would create additional risks and liabilities for the two mortgage financiers at a time when they are already supported by taxpayers, and could raise costs for homeowners in the city.
The federal regulator also contends that it would subject the GSEs to the regulation and supervision of the Chicago Department of Buildings instead of FHFA, as Congress intended.
FHFA's complaint alleges that the city's ordinance impermissibly encroaches upon FHFA's role as the sole regulator and supervisor of the GSEs.
""This lawsuit seeks to ensure that the city's proposed registration and licensing system and Ã¢â‚¬Ëœsupervision' of the Enterprises by the Department of Buildings will not thwart Congress's intent,"" FHFA said. ""Further, the registration fee represents a tax on the Enterprises and the Conservator that is expressly precluded by long-standing congressional directive.""
FHFA says it ""reluctantly took this action"" after trying unsuccessfully to address the issue with city officials and find alternative solutions to Chicago's vacant property problem.
Both Fannie Mae and Freddie Mac issued notices Monday instructing their servicers to keep a record of all expenses incurred for registration, inspection, and maintenance in order to comply with the Chicago city ordinance, including expenditures of third-party vendors.