Cook County puts mortgage companies on the hook for vacant buildings

Ordinance requires mortgagees to list, secure and maintain properties

By Mary Ellen Podmolik, Chicago Tribune reporter

December 15, 2011–20111215,0,1305913.story

The Cook County Board on Wednesday passed an ordinance designed to force mortgage companies to care for abandoned properties in the foreclosure pipeline, undeterred by a federal lawsuit filed earlier this week against a similar Chicago measure.

The passage of a second vacant building ordinance locally will likely draw more attention to the issue of foreclosures in the Chicago area and communities’ growing frustration with the look of their neighborhoods.

Data on local foreclosures that are set to be released Thursday by RealtyTrac will do little to ease those concerns in many Chicago-area communities. Overall foreclosure activity nationally in November was down 3 percent from October and down 14 percent from a year ago, and Illinois as a whole recorded declines as well.

However, in Cook County, the state’s most populous county, there was no such improvement. In fact, more than 7,400 residential properties were in some stage of the foreclosure process in November, up 20 percent from October and 3 percent from a year ago, according to RealtyTrac.

The county’s vacant building ordinance, passed without opposition Wednesday, is designed to address those vacant properties that have not yet changed hands or become bank-owned. The ordinance requires a property’s mortgagee to pay $250 to list buildings as vacant on a countywide registry and to secure them and maintain them, inside and out. Violations are subject to fines of $500 to $1,000.

A similar ordinance, with some tweaks and a $500 registration fee, was passed by the Chicago City Council last month.

On Monday, the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, filed a federal lawsuit charging that the city’s rules encroach on its role as the sole regulator of Fannie and Freddie, which own about 258,000 mortgages within the city of Chicago.

The suit, filed in U.S. District Court in Chicago, seeks to exempt those mortgages from the ordinance. On Tuesday, Chicago officials said they plan to vigorously defend the ordinance in court.

For both municipalities and U.S. regulators, a key issue is the cost of caring for properties, particularly in states such as Illinois where foreclosures are processed through overwhelmed county courts. By the end of this year, there will likely be some 80,000 foreclosure cases in Cook County’s court system.

Communities say they don’t have the financial resources and manpower to care for the growing number of residential eyesores on their blocks as the housing crisis continues. Meanwhile, U.S. regulators don’t want anything that would add to the financial burdens of Fannie Mae and Freddie Mac, whose rescue has already cost taxpayers $151 billion.

Chicago may very well become the test case for other municipalities’ efforts. Las Vegas passed a similar ordinance but regulators have mounted no legal challenge there.

Cook County Commissioner Bridget Gainer, D-Chicago, the ordinance’s sponsor, noted that with almost 10 percent of the county’s residential buildings vacant, the federal agency’s lawsuit not only goes against its own mortgage agreements but is also unconscionable.

“When 75 percent of the mortgages in Cook County are owned by (the Federal Housing Finance Agency), allowing them to ignore their responsibilities to their own assets or our communities is impossible and a long-term disaster,” Gainer said.

The county ordinance, which will take effect in mid-February, will apply to all areas of unincorporated Cook County, but its reach is expected to be significantly greater because municipalities can enter into agreements with the county to enforce the ordinance within their own boundaries.

David Mekarski, Olympia Field’s village manager and a representative for the 42-community South Suburban Mayors and Managers Association and the 22-community South Suburban Housing Collaborative, said he expects a significant number of those municipalities to opt in to the ordinance.

“This is the single most important tool to manage the biggest asset that we have in our community, which is our homes,” Mekarski said.

Under the county ordinance, owners of vacant properties must register those parcels and take responsibility for them within 30 days of the buildings becoming vacant or after assuming ownership of the buildings. Mortgagees must do so within 60 days after a mortgage default.

The ordinance would not apply to buildings that are vacant but being cared for, under construction or rehab, the subject of a probate action, or in an ownership dispute.

 December 16, 2011  Posted by Moratorium Now!

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