The Federal Housing Finance Authority (FHFA) just won a case against the City of Chicago, a case which was filed nearly two years ago, right after the Chicago Vacant Building Ordinance took effect.
The FHFA argued that vacant foreclosed buildings with Fannie Mae and Freddie Mac mortgages should not be subject to the Chicago Vacant Building Ordinance, claiming that the city acted outside of its jurisdiction in making laws applicable to federal agencies, and that the registration fee requir4d by the ordinance was essentially a tax on the federal government.
While Fannie Mae and Freddie Mac have their own standards for the maintenance of vacant buildings, those standards are by no means as stringent as Chicago's ordinance. In Chicago alone, the FHFA owns nearly 260,000 mortgages. Granted, not all of them are vacant or foreclosed, but the decision still has ramifications for Chicago, which is trying to get derelict properties under control.
Spurred on by its success, the FHFA is expected to file more such suits in other areas with vacant building ordinances.
Wednesday, August 28, 2013
Monday, August 26, 2013
What is Chicago's Vacant Building Ordinance?
One of the weapons in the city's arsenal to fight foreclosure is the Vacant Building Ordinance. The ordinance aims to keep ownership accountable for the condition of any vacant buildings in the city.
What's a vacant building? Well, according to the ordinance, for a building to be vacant, it has to lack the "habitual presence of human beings who have a right to be on the premises." In English, that means it has to be vacant of people who are actually supposed to be or allowed to be there. Another way to define vacancy is that a property is vacant if there is no legal business or legal construction activity at the premises. Residential apartment buildings are not vacant unless they are at least 90% unoccupied. For an individual residence to be considered occupied, someone must have actually lived there for at least three months out of the last nine months, and intend to return and live there. Otherwise, it shall be deemed vacant.
So let's say the house or building is deemed vacant. Then what? If it is vacant for more than 30 days, the owners must do all of the following:
1) Register the building with the Department of Buildings as vacant property. The registration is for 6 months only, and costs $250. It must be updated every 6 months as necessary. If the building has any code violation at the time of renewal, the renewal fee is $500 instead of $250. And if the building still has violations at the second renewal, the renewal fee is then $750. If the building has violations at the time of the third renewal, the registration fee shall be $1,000.
2) Procure liability insurance and provide proof of the same to the Department of Buildings. For residential property, the minimum insurance is $300,000. For commercial property, the minimum insurance is $1,000,000.
3) Maintain the property all year long. The owner must take care of the roof, the foundation, the stairs, decks, fences, floors, balconies, chimneys, gutters, etc. The owner must also do seasonal work -- weeding and cutting grass in the summer, and snow plowing and winterizing plumbing in the winter. The owner must also keep the property rodent and pest-free.
4) For the first six months, the owner must cover all openings into the property with plywood. For the next six months and thereafter, the openings must be covered with steel, commercial-grade security paneling. If the owner wishes, in lieu of the steel paneling, he may install a burglar alarm, standard security door, and glazed windows.
Fines are steep, so compliance is important!
What's a vacant building? Well, according to the ordinance, for a building to be vacant, it has to lack the "habitual presence of human beings who have a right to be on the premises." In English, that means it has to be vacant of people who are actually supposed to be or allowed to be there. Another way to define vacancy is that a property is vacant if there is no legal business or legal construction activity at the premises. Residential apartment buildings are not vacant unless they are at least 90% unoccupied. For an individual residence to be considered occupied, someone must have actually lived there for at least three months out of the last nine months, and intend to return and live there. Otherwise, it shall be deemed vacant.
So let's say the house or building is deemed vacant. Then what? If it is vacant for more than 30 days, the owners must do all of the following:
1) Register the building with the Department of Buildings as vacant property. The registration is for 6 months only, and costs $250. It must be updated every 6 months as necessary. If the building has any code violation at the time of renewal, the renewal fee is $500 instead of $250. And if the building still has violations at the second renewal, the renewal fee is then $750. If the building has violations at the time of the third renewal, the registration fee shall be $1,000.
2) Procure liability insurance and provide proof of the same to the Department of Buildings. For residential property, the minimum insurance is $300,000. For commercial property, the minimum insurance is $1,000,000.
3) Maintain the property all year long. The owner must take care of the roof, the foundation, the stairs, decks, fences, floors, balconies, chimneys, gutters, etc. The owner must also do seasonal work -- weeding and cutting grass in the summer, and snow plowing and winterizing plumbing in the winter. The owner must also keep the property rodent and pest-free.
4) For the first six months, the owner must cover all openings into the property with plywood. For the next six months and thereafter, the openings must be covered with steel, commercial-grade security paneling. If the owner wishes, in lieu of the steel paneling, he may install a burglar alarm, standard security door, and glazed windows.
Fines are steep, so compliance is important!
Thursday, August 22, 2013
New Law Protecting Illinois Tenants of Foreclosed Properties
Since federal protections for tenants in foreclosed properties are expiring next year, yesterday the governor signed a law extending federal protections for renters in foreclosed buildings in Illinois,
Under the law, if you are renting in a building that has been foreclosed, you are entitled to the following protections:
1) The bank (or a receiver) that owns the foreclosed building, or any other person or entity that buys the building out of foreclosure, must honor your lease until it ends.
2) The bank or owner must give you at least 90 days' written notice before asking you to leave.
3) If the new owner intends to move in, however, he or she can terminate your lease upon 90 days' written notice.
If you are otherwise honoring your lease and the new owner tries to evict you, you can fall back on these protections and file a case against your landlord.
Under the law, if you are renting in a building that has been foreclosed, you are entitled to the following protections:
1) The bank (or a receiver) that owns the foreclosed building, or any other person or entity that buys the building out of foreclosure, must honor your lease until it ends.
2) The bank or owner must give you at least 90 days' written notice before asking you to leave.
3) If the new owner intends to move in, however, he or she can terminate your lease upon 90 days' written notice.
If you are otherwise honoring your lease and the new owner tries to evict you, you can fall back on these protections and file a case against your landlord.
Thursday, August 15, 2013
Foreclosures Decline in 2013
It looks like 2013 might finally be the year that foreclosures start to decline. According to RealtyTrac, nationwide, lenders repossessed over 30% fewer homes last month than they did a year ago, in July of 2012. They also initiated foreclosure proceedings on nearly 40% less homes than they did in July 2012. If you look at how 2013 has gone so far, we have the fewest foreclosures this year since 2007.
Of course, nearly 20% of all homes in the country that have a mortgage are still underwater. In a normal housing market, that number should not be more than 5%. And it's interesting to note, though certainly not surprising, that many of those home loans were made during the real estate boom.
But overall, it's good news for the housing market. As foreclosures decline and get off the market, with any luck housing will start to thrive again!
Of course, nearly 20% of all homes in the country that have a mortgage are still underwater. In a normal housing market, that number should not be more than 5%. And it's interesting to note, though certainly not surprising, that many of those home loans were made during the real estate boom.
But overall, it's good news for the housing market. As foreclosures decline and get off the market, with any luck housing will start to thrive again!
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