Lenders challenge foreclosure legislation in St. Louis City
A new ordinance could offer struggling St. Louis City homeowners an option to help avoid foreclosure.
The program would extend a loan mediation process to any homeowner who requests it from their bank, just like the one passed two weeks ago in St. Louis County. Ignoring this request would cost a lender a $500 fine.
But, banks claim the laws violate state statutes prohibiting government intervention into the foreclosure process. They say it would mean fewer loans and increased costs.
St. Louis Mayor Francis Slay disagrees.
"This mandates a process, it doesn't mandate a result,” Slay said. “It's up to the borrower if the borrower wants to pursue mediation. Then it's up to the bank and the borrower to work to together on a good-faith effort to try to work it out. If they don't work it out the bank can still foreclose."
Max Cook is the President of the Missouri Bankers Association and says requiring mediation will make lenders less willing to issue loans, ultimately hurting homeowners.
"It can have a chilling effect on credit in those marketplaces that have those types of programs,” Cook said. “Because lenders, in essence, sometimes will just say ‘You know what, we're just not going to make loans there; we can't afford to.’”
Slay believes this move to prevent foreclosures will benefit both city residents and banks.
“Keeping people in their homes is good for everyone,” Slay said. “It’s good for our families… It’s good for our neighborhoods and it’s good for the borrower who can make good on his or her obligation and it’s good for the lender, as well. If the lender can keep the borrower in the home, then it’s good for the lender. So this is good for everyone if we have something like that.”
Cook suggested that a voluntary mediation program might be a better way to tackle the foreclosure problem.
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