Last month, a City of Chicago attorney described a vacant property ordinance then before a council committee as a "very legally aggressive measure." The attorney, Jeffrey Levine, told aldermen the bill would be an exercise of the city's home rule authority, around which there is a substantive body of law. The council eventually passed the ordinance unanimously through committee and out of the full council with Mayor Rahm Emanuel's full endorsement.
The ordinance expands the definition of property ownership in Chicago, making all mortgagees owners and thus requiring them to conduct building maintenance and upkeep. The new language is meant to force lending institutions to care for vacant properties before completion of the foreclosure process; many vacants are in some stage of court proceedings, blighting neighborhoods, driving down local property values and costing taxpayers money. Emanuel's office said in 2010, the city spent $15.5 million on demolishing vacant homes and garages and on general maintenance and board-ups of vacant homes.
Advocates are already using the ordinance to push banks to better maintain such properties. Around a dozen protestors from Action Now held a picket this morning near the Bank of America building in the Loop, calling on the firm to hire neighborhood residents to clean up vacant buildings it has foreclosed upon on the South Side.
The ordinance is schedule to take affect on Sept. 18, a city spokesperson confirmed, but the bill could face a lawsuit before that date.
Representatives from local and national lending and mortgage finance worlds have watched passage of the vacant building ordinance with dismay. On Monday, the news service Housing Wire reported that Richard Gottlieb, chairman of Dykema's Financial Industry Group, believes the vacant building bill is essentially a warning for lenders, but something that will eventually be overturned in court.
"This is just a gotcha moment for the city. They are going to punish lenders in circumstances where the code violation is 100 percent out of their control," Gottlieb told Housing Wire.
Rod Luckhart, the current president of the Illinois Mortgage Bankers Association, said in an interview today that he knew of no specific plan for legal action against the bill. Luckhart, however, said he could not rule out such a step either. The Illinois Mortgage Bankers Associations opposed the bill during city committee discussion of it in July.
"We're actually thinking of all our options right now," Luckhart said.
"We feel put sort of in a corner here. We don't know what the effective date is here. We haven't heard the date when it goes active. If there is any time at all to work on this, to amend or change this ordinance, that's what we want to do," he went on to say. "Otherwise you kind of leave the industry … where we are going to be pushed into probably a more desperate [situation]. We don't feel desperate yet. We feel like it's just not being fully considered what the ramifications are. We don't know if there's going to be a lawsuit."
Luckhart reiterated points members of his organization and other lending institutions made during the council's committee hearing about the bill. He predicted it would spook the secondary mortgage investment market in Chicago, drive up the cost of lending in the city and place lenders in a catch-22 situation where they must maintain buildings they do not own. Luckhart said faster foreclosure proceedings were a better option.
At Action Now's rally this morning, Aileen Kelleher, a spokeswoman for the organization, acknowledged a court challenge could be coming. She said that a lawsuit would ratchet up the pressure on legislators in Springfield to pass legislation allowing the city to pursue tighter vacant building rules.
© Community Renewal Society 2011