A Chicago ordinance that expands the city’s definition of “property owner” to include lenders and financial firms could subdue investor interest in residential mortgage-backed securities, Moody’s Investors Service said in a new report. Moody’s made that assessment after reviewing the Chicago ordinance, which essentially forces lenders to cover maintenance and upkeep costs on vacant properties even if they still do not have full possession of title. The ordinance has generated a great deal of buzz since its passage in late July, with some parties calling it unconstitutional. In its analysis of the code, Moody’s warned the ordinance “burdens lenders with the downside of ownership expense without the benefit of property rights.” The ratings giant said by expanding the definition of property owner, the ordinance – without further clarification – sweeps up mortgage lenders and assignees named in the RMBS securitization process. “The mandate presents complex dilemmas, and the questions raised will make securitized mortgages vulnerable to this law less attractive to investors,” Moody’s wrote. “For example, prior to foreclosure, how can mortgage lenders identify and remedy problems without violating someone else’s property rights? Will courts tolerate trespassing? Or alternatively, will the courts overrule the ordinance’s passing of liability to lenders unable to legally exercise their ownership rights?” The City of Chicago, which is dealing with an influx of foreclosure properties, passed the ordinance to eliminate urban blight caused by vacant properties. John O’Leary, CEO of vacant property security firm VPS Inc. can attest to the fact that Chicago has been inundated with new foreclosures. O’Leary’s national operations are headquartered in the Windy City. “The big concern (within neighborhoods) is the value of properties,” O’Leary told HousingWire. He added the common symptoms of a foreclosure epidemic include homes being turned into drug dens, vandals destroying property and thieves scouring vacant houses for high-priced copper and other goods that can be sold for profit. VPS has been combating these threats for financial institutions by offering upgraded security products from battery-operated alarm systems to steel doors that make it extremely difficult to break in. “We’ve received calls thanking us for the jobs that we have done,” O’Leary said. While O’Leary did not share his opinion on the Chicago ordinance itself, he says cities nationwide are concerned about foreclosure blight.  “I can tell you a lot of major cities are looking at this,” he added. Write to: Kerri Panchuk.