Chicago’s City Council passed an ordinance which will “raise the liability of financial institutions who have an interest in a property,” including vacant properties in the process of foreclosure, said Housing Wire. Previously, these responsibilities and complaints would have left the property owner at fault.
Essentially, the financial institution will be deemed the “property owner.”
Some of this upkeep may require the lender to do seasonal yard work such as cutting grass and shoveling snow, in addition to dealing with any further complaints about the property’s state.
While many are in support of the efforts, as foreclosed properties can be an eyesore in both the worst and best of communities, the American Securitization Forum (ASF) worries that the ordinance “could cause lenders and investors to shy away from the mortgage market over uncertainties about legal costs and obligations.” This would definitely serve as a further setback in the current market.
The effort reaches further than visual appeal however, with Chicago’s vacant properties forcing the city to spend more than $15 million on vacant building in 2010, according to the article. Still, ASF finds flaws in the alteration of responsibilities, claiming that it ignores property rights and could soon be the “subject of significant legal challenges.”
“We strongly object to the proposition that a lender can or should be considered an owner and required to undertake property maintenance responsibilities prior to assuming title to the property,” ASF wrote to the city leaders. “A lender under a mortgage loan or a subsequent assignee does not own the property securing a mortgage loan. Rather, the borrower owns the property and has granted a lien on the property to the lender to secure the borrower’s loan payment obligations.”
The Federal Housing Finance Agency also found flaws in the ordinance, saying that the efforts may actually have opposite impacts, unintentionally harming homeowners.