The Federal Housing Finance Agency, acting as conservator for mortgage giants Fannie Mae and Freddie Mac, sued Chicago in federal court on December 12. FHFA challenges a city ordinance that requires mortgagees of vacant properties to pay a registration fee and conduct monthly inspections of vacant properties. These requirements apply even if the mortgagee has not yet foreclosed on the property. FHFA’s suit sounds primarily in federal preemption.
Chicago’s ordinance is yet another attempt by a local government to address the fallout from subprime lending. Cleveland, for instance, unsuccessfully sued banks for public nuisance, and Baltimore sued banks for discriminatory subprime lending based on the Fair Housing Act. Other cities have enacted ordinances attempting to regulate or prohibit subprime lending.
The complaint in the Chicago case can be found here: http://www.scribd.com/doc/75530336/FHFA-v-ChiTown.