Judge rules on Chicago vacant-buildings law

A federal judge in Chicago dealt a blow to a city ordinance designed to address neighborhood blight caused by vacant buildings in foreclosure — though the city said Monday it would keep pressing for better maintenance of such properties.

The two-year-old ordinance was adopted amid concern that buildings abandoned during the nation’s financial crisis could serve as crime-gang hideouts and, in general, lower neighborhood property values.

But in a decision posted Friday, Judge Thomas M. Durkin ruled that thousands of properties controlled by the Federal Housing Financing Agency, or FHFA, don’t have to comply with fees and fines under the ordinance.

In his 34-page opinion, which could have implications for other cities, he concludes fees to register vacant buildings amount to “an impermissible tax” by a municipality on the federal government.

The FHFA, created by the 2008 Housing and Economic Recovery Act, oversees Fannie Mae and Freddie Mac — mortgage-guarantee giants that own hundreds of thousands of loans backed by Chicago properties.

The Chicago ordinance calls for a $500 registration fee per vacant building in foreclosure with mortgages backed by Fannie and Freddie. Failure to maintain buildings also triggers fines of up to $1,000 per infraction.

Allowing cities to impose new obligations on a U.S. agency, Durkin added, “would invite chaos.”

Chicago Mayor Rahm Emanuel’s office issued a statement Monday expressing disappointment in the ruling.

“(But) we will continue to hold financial institutions responsible for maintaining properties while protecting our residents and communities from the dangers vacant properties create,” it said.

The statement didn’t say if Chicago would appeal.

The FHFA welcomed the ruling, adding in a statement that Fannie and Freddie have their own procedures in place for maintaining vacant properties.