(FHFA) filed a lawsuit on its on behalf and on behalf of Fannie and
Freddie in federal court in Chicago, Illinois, challenging the City of
Chicago's recent amendments to its Municipal Code. A copy of the
complaint is attached.
As you may recall, the Chicago City Council recently amended the Chicago
Municipal Code to make lenders and servicers responsible for maintenance
on vacant homes when they are the mortgagee, or an agent or assignee of
the mortgagee (the "Ordinance"). See our prior update below.
The Ordinance was formally published on November 9, 2011, and became
effective November 19, 2011.
The FHFA's lawsuit points out that the Housing and Economic Recovery Act
of 2008 ("HERA") provides that, while acting as Conservator, the FHFA is
not subject to the supervision or direction of any other agency. 12 U.S.C.
§ 4617(a)(7). HERA also provides that the FHFA is to be the exclusive
regulator of the GSEs and grants the Director of FHFA "general regulatory
authority." 12 U.S.C. § 4511.
The FHFA also points out that HERA provides that the Conservator
"including its franchise, its capital, reserves, and surplus, and its
income, shall be exempt from all taxation imposed by any State, county,
municipality, or local taxing authority …." 12 U.S.C. § 4617(j)(1), (2).
In addition, the GSEs are immune from state and local taxation. See 12
U.S.C. § 1723a(c) (Fannie Mae immunity); § 1452(e) (Freddie Mac immunity).
Upon placing the GSEs into conservatorships, the FHFA succeeded to all the
GSEs' rights with respect to their assets. 12 U.S.C. § 4617(a).
The FHFA therefore argues that the Ordinance:
1. Impermissibly subjects the Conservator to the supervision and
direction of the City of Chicago Department of Buildings, in violation of
federal law;
2. The provisions of the Ordinance that require the GSEs to register with
the City of Chicago and then comply with specific ongoing obligations are
a regulatory scheme that impermissibly subjects the GSEs to the governance
and supervision of the City of Chicago and its Department of Buildings, in
violation of federal law;
3. The provisions of the Ordinance which require a base registration fee
constitute an impermissible tax in violation of each entity's statutory
immunity from taxation; and
4. The Ordinance incorporates a taxing feature that would unlawfully be
applied to servicers of loans on behalf of the GSEs.
Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: RWutscher@mtwllp.com
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Our updates are available on the internet, in searchable format, at:
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________________________________
from Ralph Wutscher rwutscher@mtwllp.com
to Ralph Wutscher <rwutscher@kw-llp.com>
cc socaloffice@mtwllp.com, dcoffice@mtwllp.com, Chicago Office
date July 29, 2011
The Chicago City Council recently amended the Chicago Municipal Code to
make lenders and servicers responsible for maintenance on vacant homes
when they are the mortgagee, or an agent or assignee of the mortgagee. A
copy of the amendment is attached.
In relevant part, the amended ordinance modifies the definition of an
"owner" to now include "any person who alone, jointly or severally with
others is a mortgagee who holds a mortgage on the property, or is an
assignee or agent of the mortgagee."
Under the ordinance, a building lacking three consecutive months of
authorized habitual human presence may generally be deemed "vacant."
Existing owner responsibilities under the Municipal Code already include a
vacant building registration and fee process, various lot maintenance
standards, such as requirements to abate grass and weeds and keep walkways
shoveled clear of snow, as well as various internal and external
maintenance standards, such as requirements to keep all entrances and
windows to the building secure, maintain plumbing and electrical systems,
and finally, a requirement to also provide continuous exterior lighting
from dusk until dawn.
The obligation to keep the building secure is also notable in that if the
building is deemed "violated" by the Commissioner of Buildings, then
additional responsibilities may accrue, such as an additional obligation
to install and maintain a burglar alarm or post a watchman.
As is the case for REO properties, fines and penalties under this section
could be as high as $500 and $1,000 per offense, per day, with the City
typically taking the position that each separate issue with the property
is a separate offense.
Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: RWutscher@mtwllp.com
NOTICE: We do not send unsolicited emails. If you received this email in
error, or if you wish to be removed from our update distribution list,
please simply reply to this email and state your intention. Thank you.
Our updates are available on the internet, in searchable format, at:
http://updates.kw-llp.com
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