Fannie Mae and Freddie Mac sued the city of Chicago on Monday over an ordinance that makes mortgage creditors liable for the upkeep of vacant properties.
Lenders are liable for fines up to $1,000 if they do not maintain the property, or provide basic care / upkeep. Currently, the city is backlogged with numerous amounts of foreclosures due to legislation that requires banks to go through the courts to repossess properties.
The amount of foreclosures and vacant properties in turn further cost for the city. Researchers at the nonprofit Woodstock Institute estimated that nearly 1,900 vacant properties in Chicago are stuck in the foreclosure process at a cost of $36 million.
Fannie and Freddie have stated that the ordinance oversteps federal law and these matters are in the jurisdiction of the FHFA (Federal Housing Finance Agency).
The outcome of this lawsuit could either prevent, or duplicate similar ordinances in other cities, adding further losses to Fannie and Freddie.
Starting next year, Chicago estimates expenditures to continue to grow, while revenues steadily decline.
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