According to the Chicago City Council, if a home has been abandoned then the lender who holds the lien on the property is responsible for the upkeep of that home – even if the lender did not foreclose on the property and the borrower still holds the title[1]. Rahm Emmanuel, Chicago’s mayor, stated that he is “proud of this strong piece of legislation requiring banks to be good neighbors” and believes that “Chicago is leading the way in protecting residents, neighborhoods and communities from the devastating impact of foreclosure.” However, since the lenders’ responsibility begins before the foreclosure process is complete, the legislation has amended the existing definition of “property owner” as we know it. Now, the term “property owner” includes “an entity who holds a mortgage on a property.” Those “property owners” are required to perform “routine maintenance” on the properties, including repairs, yard work, trash removal and boarding up entrances and windows[2].
Although this legislation may be well-intentioned, blurring the lines between lenders and property owners before those lenders take title via foreclosure may be a slippery slope. In fact, the American Securitization Forum (ASF) has warned that lenders and investors in the Chicago area are likely to shy away from the real estate market since legal costs and obligations have suddenly become very unclear. Emmanuel and the council responded that vacancies are becoming a “financial burden on the city” and that the new ordinance is a solution to that problem. However, the ordinance also ignores basic property rights in the process.
Do you think that this is good legislation? Can it work?
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[1] http://www.dsnews.com/articles/chicago-holds-lenders-accountable-for-vacant-homes-even-without-title-2011-07-29
[2] http://www.housingwire.com/2011/07/28/chicago-ordinance-goes-after-lenders-for-upkeep-on-vacant-homes
Rahm Emmanuel is, and has always been, an idiot.
The bottom line is that if the house has been abandoned it is only a amtetr of time before the bank takes it. By forcing the banks to maintain the property it stops the start of neighborhood blight.
This is long over due. Ifr Bankers were smart (which we know is sometimes true) they would takeover the property as soon as possible and get it in shape to be resold.
Bob
What did you expect from the President’s “home town” and his former “Chief Socialist of Staff”!!!??
As Bryan mentions in the article, this is going to create a real headache for Chicago property owners. With markets across the country already in trouble, this is just going to make it more difficult to get mortgage financing for the people of Chicagoland. Oh well, you elected these idiots and you can unelect them!! I hope!!
My understanding is that in the mortgage paperwork it states that if you abandon the property the lender can take action to secure the property so that the property which is the collateral for the mortgage, can be kept in good condition. So just because cities are enforcing this when lenders are trying to avoid it does not mean property rights are being taken away from anyone. Those property owners that are around properties that are vacant also have rights and a blighted property next door affects their homes value.
Lenders sometimes come into homes that are vacant but listed with realtors despite the fact that have been informed that a short sale is being done. They remove realtor lock boxes and take stuff out that may be in the homes yet when you ask them to do it because of lets say a death where there is no one left to secure the property they balk. When its convenient for them or the property is in great condition they have no qualms about taking control even when they legally should not do it but when its obvoius that they need to step in they back away.
They can’t pick and choose the areas that they want to secure. Good for Chicago and more municipalities will follow. The cost to cut grass and other basic maintenance issues should not fall on the cities.
Lenders have been raking in profits for decades and just because they gambled this time and lost does not mean they can walk away from their responsibilities.e
As a multi-property owner in Baltimore, MD, a city that has some 5,000+ vacant and abandoned buildings, I can certainly appreciate the sentiment behind this Chicago legislation. However, on the merits of the legislation I do feel that forcing banks or other lien holders to be responsible for properties before they take title is grossly unfair and will proably result in reduced lending activities in this jurisdiction.
People like Emanuel see the world as a “mob”. And, they feel it is their duty and obligation to lead that mob, due to their self described superior knowledge, training, wisdom and position. This is the way mobsters think. Personal property rights are ALWAYS subject to the mob ruler’s sensibilities. As we continue to diminish the protection of the individual property rights- which were fundamental to America’s prosperity and freedom, we turn over our rights, prosperity, and freedom to the State. Some call this “Progressive”. The progressive destruction of personal rights in exchange for domination by government- or, the Mob. The constitution was drafted to PROTECT personal property rights (including one’s right to life).. but man’s natural state is to covet his neighbor’s property- At the extreme is the Marxist determination to cancel all personal property rights and consolidate use and enjoyment for dispensation to party “favorites”- those who support the regime.
Slippery slope.
The large lending institutions may take property maintenance to the level of destroying the property intentionally.
Then writing off the loan as non-recoverable.
Take care what powers you hand the Banksters.
I think this is a double edge sword. One problem I have seen already happening here in MN is properties freezing during the winter and some “winterization” companies oever steppin their boundaries and going in and winterizing properties that are VACANT, but NOT abandoned. That creates a problem as they change locks and creates a huge logistics problems for Short Sales as far as being able to show the houses. These companies get paid per job, so it’s in their best interest to “secure” as many houses as possible and to me it becomes an ethical issue. This is going to give these less than ethical companies a green light and cause a lot of Havoc. So if done “correctly” this could be a good thing, if not, it could cause A LOT of problems and unnecessary expenses to a seller who really wants to get their upside down house sold.
I’m curious how the legislation defines “abandoned”. If I go on vacation for the summer, and the grass is three feet high, and newspapers are piling up on the porch, have I “abandoned” the house?
Typical with the Government – they are well intentioned but create even worse problems. If the lenders pull out on new loans they will have a worse problem.
I say “Bull Pucky” to Rahm Emanuel. If the banks can be responsible because they are lenders, then Rahm can be responsible because he is Chicago’s elected mayor. You shoveled it in DC for 2 years, now get out the shovel and rake, Rahm, and clean up your home town. I feel no pity for the people of Chicago. They elected this idiot. You are getting who and what you deserve.
After the way BOA treated me when I wanted to give my neighbor an easement, I’m convinced they own the property not me, so I say let the banks maintain all their properties they have allowed to be abandoned!