Was anyone surprised by this?
The Federal Housing Finance Agency sued Chicago to prevent the enforcement of a recent ordinance forcing the maintenance of vacant homes before the foreclosure process is completed.
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The FHFA claims in a lawsuit filed with the U.S. District Court for the Northern District of Illinois that the ordinance forces Fannie Mae and Freddie Mac to comply "even when the enterprises have not foreclosed upon a property and therefore do not have ownership of the property."
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The FHFA claims in the suit the ordinance keeps it from "preserving and conserving" the assets of Fannie and Freddie as Congress mandated in 2008. Both firms owe the Treasury Department a combined $151 billion in bailouts as a result of the conservatorship.
Fannie and Freddie are also requiring their loan servicers to track expenses incurred as a result of this ordinance. The not-so-implicit threat is that the mortgage giants are going to make mortgage pricing in The Windy City commensurate with the cost of doing business there (in addition, of course, to the normal bribery costs incurred by businesses in the Blogo-rich environment of Illinois in general and Chicago in particular), and Chicagoans shouldn't be surprised to see higher-than-the-national-average pricing if this kind of idiocy continues.
We mentioned several months ago that some legal experts believe the ordinance clearly runs afoul of the 14th Amendment. Unfortunately, litigating these cases takes a long time and is expensive. In the case of the FHFA v.s Chicago knife fight, those ending up with the biggest wounds will be the taxpayers, with those living in Chicago getting a double slicing. Fannie and Freddie are in conservatorship, so, in essence, you have the US taxpayers and the citizens of Chicago funding the cost of litigation that is likely not to be in anyone's interests except (as always in the most litigious society since Rome) those of trial lawyers.
In the interim, how many more homes will be cared for because of the ordinance than would have been cared for without it? When the dust finally settles, will there be any hell to pay by anyone over this waste of time and money? Don't count on it. As I pointed out a couple of years ago, when the Buffalo, New York, sued lenders to try to make them responsible for taking care of properties they didn't own and a judge later told the city, "Nice try, but no cigar," the main stream press trumpeted the initial lawsuit when it was filed, but when the judge dismissed it, "the dismissal garnered hardly a whisper."
