Arnold & Porter Client FHFA Ruled Exempt from Chicago Foreclosure Law and Its Fees

U.S. District Court Judge Thomas Durkin ruled on August 23, 2013 that any vacant buildings in foreclosure with mortgages backed by Fannie Mae and Freddie Mac do not have to follow Chicago’s vacant building registration and maintenance ordinance.  It is a significant victory for Arnold & Porter LLP’s client, the Federal Housing Finance Agency, which the court acknowledged was given “broad powers” by Congress to supervise Fannie Mae and Freddie Mac in administering their nationwide programs that respond to the country’s financial crisis.

The firm had filed the federal lawsuit on behalf of the FHFA against the city, claiming that properties that served as collateral for Fannie Mae and Freddie Mac mortgages were exempt from the ordinance and that any related fees or penalties constituted an illegal “tax” on them.  Chicago’s law requires not just owners of vacant buildings, but also mortgagees -- the holder of the mortgage but not necessarily the owner of the mortgage -- to register a building after it becomes vacant, pay a $500 registration fee, and maintain certain property standards. Violators of the ordinance can trigger fees of $500 to $1,000 for each infraction.  The City contended that any fines and penalties it imposed under its ordinance were actually assessed against privately-owned “Fannie and Freddie,” and not the FHFA.  In denying the city’s motions for dismissal, however, Judge Durkin ruled that its line of reasoning was “meritless.”   

Arnold & Porter partners Howard N. Cayne, Asim Varma and David B. Bergman, resident in the firm’s DC office, served on the firm’s legal team.  The case is cited as Federal Housing Finance Agency, on its own behalf and as conservator of Fannie Mae and Freddie Mac v. City of Chicago, U.S. District Court for the Northern District of Illinois, Eastern Division, No. 11 C 8795.