[Update: Corrects the timeline of discussions between Chicago and banks.]
City officials in Chicago, with an ear to mortgage lenders and servicers, decided that maybe its pre-foreclosure requirements for vacant buildings were a bit too strict.
The ordinance, in effect since November, requires the owner of a vacant building to register it with the city within 30 days, and pay a $500 fee. It also includes vacant properties that haven’t completed the foreclosure process.
But the city changed some of those requirements for mortgage servicers, easing standards from an earlier version passed in July for maintenance and upkeep inside properties not yet foreclosed. Michael Merchant, Chicago buildings commissioner, detailed the discussions with banks at a SourceMedia conference outside Dallas Thursday.
“We’re trying to work with the industry to meet these objectives,” Merchant said. The banks, which included Bank of America (BAC) and Wells Fargo (WFC), said they felt an undue burden in maintenance of vacant properties that haven’t gone through foreclosures, particularly inside, according to Merchant.
Both sides made concessions during talks, Merchant said, but city officials wanted to work with the industry to make the ordinance more palatable.
Proponents of that ordinance, including Merchant, are working on a bill in the Illinois General Assembly that could extend the rule statewide.
It would be left up to cities whether to pass a vacant property registration ordinance under SB 16, and the fee could not exceed $500.
Lawmakers amended a measure that passed last year in the Senate, related to foreclosure counseling, to include the vacant property provisions.
That amendment also includes a change that would fast-track some Illinois foreclosures of abandoned buildings. A judge would grant a mortgage holder immediate possession of an abandoned property if the previous occupant doesn’t show at a court hearing.
First-quarter foreclosures in Illinois, a judicial state, took on average 628 days, the fourth largest in the nation according to RealtyTrac.
The bill awaits a full House vote, but has drawn opposition from the Illinois Bankers Association. Merchant said the trade group has lobbied for a different bill that would alter the foreclosure timeline.
A spokesperson for the group did not immediately return a request for comment.
The Chicago ordinance has drawn its detractors. The Federal Housing Finance Agency sued the city on behalf of () and Freddie Mac, arguing the rule negatively impacts taxpayers and undercuts the agency’s authority.
The city is “not trying to use this as a cash cow,” Merchant said. Both he and FHFA chief legal counsel Alfred Pollard declined to comment on the particulars of the lawsuit.
Merchant said the city has seen property registrations nearly double since the ordinance took effect in November, while his employees in the field report a higher level of compliance.
But it’s unclear, Merchant said, how much of that is the direct result of the ordinance.