Mortgage bankers slam proposed tenant protections
A group of mortgage lenders has a warning about a proposed ordinance that Chicago Mayor Rahm Emanuel’s administration helped craft to protect tenants of foreclosed buildings. The Illinois Mortgage Bankers Association says the plan, set for a City Council hearing on Wednesday, would clog courts already struggling with a huge backlog of foreclosure cases.
“Illinois has the second-largest backlog in the nation,” said Robert Emanuel (no relation to the mayor), a Chicago attorney who serves on the association’s executive committee. “This is going to add either a new form of litigation or it’s going to complicate existing foreclosures.”
The proposal, called the “Protecting Tenants in Foreclosed Rental Property Ordinance,” would require banks to pay a $12,000 “relocation assistance” fee to renters evicted after a repossession or offer them rent-controlled leases until selling the building. The ordinance would apply to tenants in buildings large or small, even single-family houses.
An earlier version of the proposal, known as “Keep Chicago Renting” and introduced by Ald. Richard Mell (33rd) last July, would have banned post-foreclosure evictions except under limited circumstances such as the tenant’s failure to pay rent.
The goal is to keep renters in their homes and keep the buildings from standing vacant and breeding crime. On Tuesday, the Chicago-based Lawyers’ Committee for Better Housing released a study based on city data that showed crime in abandoned buildings and vacant lots is up nearly 48 percent since 2005.
“At a time when overall crime rates have been decreasing in the city of Chicago, crimes occurring within abandoned properties are actually increasing,” said Patricia Fron, the committee’s building programs administrator.
Tenant advocates and city officials negotiated for months before agreeing on the proposal’s main elements in early April. The council’s Housing Committee is holding the hearing Wednesday morning.
The mortgage bankers association says it’s planning to send representatives to the hearing. The group says the proposal should not include single-family homes and says the blame for abandoned buildings belongs less to banks than to investors who are out to buy and sell properties for quick gain — a practice known as flipping. The bankers say the tenant ordinance would make Chicago less attractive for lending and increase costs for borrowers.
Officials of the Illinois Bankers Association, another group likely to oppose the proposal, did not return calls or messages about it Tuesday.