CHICAGO — The city of Chicago has amended a city code to reduce the number of vacant buildings throughout Chicago, socking lenders and mortgage servicers with higher fees in the process, even as those lenders navigate the slow county judicial foreclosure process.

Under the change, which took effect Oct. 19, City Hall has broadened requirements for registering vacant buildings to include non-residential properties, shortened the registration timeline and increased registration fees.

While the city has a problematic number of vacant buildings, attorneys for the financial industry say the true motive behind the amendment is money.

“The provision is purely an effort by the city to increase its revenue,” said Simon Fleischmann and Ryan Holz, attorneys at Locke Lord in Chicago who represent financial institutions, in joint answers to emailed questions from the Cook County Record.

Previously, lenders and servicers were only required to register vacant residential properties that secure loans. But that provision has been expanded to include commercial and industrial properties, requiring lenders and servicers to comb through their portfolios to find and register vacant properties backing loans, the attorneys said.

That step alone will increase costs for those lenders and servicers, the attorneys said, but it’s only the first piece. The cost of registering a vacant building increased from $500 to $700 under the amendment. In addition, renewing vacant properties’ registration will incur a $700 fee – a step that formerly cost nothing.

A mortgagee must renew as long as the property is vacant or the borrower is in default. That means even if the building goes from vacant to occupied, if the owner is still in default, the registration must stay current.

“Lenders and servicers should care about this amendment because it is yet another increase in the cost of doing business in Chicago,” Fleischmann and Holz wrote. “Servicers and lenders are going to need to expand their compliance programs to include new types of properties, which adds costs in terms of dollars and human resources, or they are going to face legal action that is likely to include the imposition of significant fines.”

The ordinance also sets a strict timeline. A lender or servicer is required to register a vacant property securing a defaulted loan no later than 30 days after the building becomes vacant or 10 days after the owner defaults, meaning the borrower is 60 days past-due on a scheduled payments for buildings with no more than four units. The registration deadline is 90 days if the building has five or more units. 

Under previous city rules, lenders or servicers had 60 days after a default to register. The standard operating procedure of the industry is usually much slower and will be affected by the change, the lawyers said.

Fleischmann and Holz think those in the industry should urge the city to clarify the scope of the regulation. While complying with the amended ordinance is important, lenders and services should be involved in improving the city’s approach to the problem of vacant buildings. While they agree that vacant buildings pose a problem, the attorneys said it would be more effective to make the mortgage foreclosure process more efficient in Cook County.

“If a defaulted loan is secured by a vacant property, the lender and servicer would like to ultimately sell the property to an interested purchaser, but the lender and servicer cannot do so unless they own the property,” they wrote. “Ownership under these circumstances is often transferred through a foreclosure process that is very lengthy in the Cook County courts.”

Want to get notified whenever we write about any of these organizations ?
Next time we write about any of these organizations, we'll email you a link to the story. You may edit your settings or unsubscribe at any time.

Organizations in this Story

Locke Lord LLP
111 South Wacker Drive
Chicago, IL 60606

City of Chicago
121 N LaSalle St
Chicago, IL 60602

More News