Chicago cannot compel Fannie, Freddie regulator to follow vacant building ordinance

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A federal judge has ruled that the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, does not have to follow Chicago’s vacant building ordinance.

For buildings in which the mortgage is backed by Fannie or Freddie, the ordinance would have required the FHFA to promptly register the property after it becomes vacant, pay a $500 registration fee and maintain certain property standards with fees ranging from $500 to $1,000 for infractions, the Chicago Tribune reported.

The FHFA promptly filed a lawsuit against the city after the ordinance took effect in November 2011. At the time, the agency said it owned about 258,000 mortgages in Chicago. In the case, the FHFA argued that the properties it backed were exempt from the ordinance and the city could not make law for federal agencies.

The federal judge deciding the case largely agreed with the FHFA’s arguments.

“This is not to say that FHFA can let properties where it is the mortgagee become decrepit,” the judge wrote. “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 decision deals a blow to a city grappling with thousands of empty buildings dragging down neighborhoods, the Tribune said. The paper also noted the decision has national implications for more than 1,000 municipalities nationwide that have similar laws on the books and are now vulnerable to similar lawsuits from the FHFA.

Source: Chicago Tribune