Ever since the collapse of the housing bubble, local officials around the country have had to deal with a massive problem of homes effectively abandoned by banks and other absentee owners.

With the direct and indirect costs of this neglect running into the billions of dollars, scores of cities and towns have passed laws calling on lenders or mortgage holders to pay a fee for maintaining the properties they have taken steps to reclaim. Now, as Chicago has learned, such efforts face an unexpected threat from an arm of the United States government – the little-known Federal Housing Finance Agency, or FHFA.

In Chicago, banks had been walking away from the foreclosure process after deciding that it might not generate enough money to justify the expense of maintenance. The city council responded with an ordinance requiring mortgage holders to maintain homes before taking ownership of them. The council had carefully crafted its rule to answer the criticisms of a group of major banks, but the FHFA objected.

As the overseer of government-backed mortgage firms Fannie Mae and Freddie Mac (known as the GSEs), it filed a lawsuit characterizing the maintenance fees as an illegal tax. In September, a federal judge upheld that claim, letting Fannie and Freddie off the hook for maintaining vacant Chicago homes with GSE-backed mortgages.

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