Missouri Senate deals big blow to local foreclosure mediation ordinances
This article first appeared in the St. Louis Beacon: The Missouri Senate sent legislation to Gov. Jay Nixon aimed at abolishing the foreclosure mediation ordinances in St. Louis County and St. Louis, constituting a major blow to the programs.
State Rep. Stanley Cox, R-Sedalia, and House Majority Leader John Diehl, R-Town and Country, sponsored legislation to “pre-empt” foreclosure mediation programs in counties or cities.
On Monday, the Missouri Senate passed Diehl and Cox's bill by a 26-7 margin. Since the measure already had passed the House, it now goes to Nixon for his consideration.
The votes in both chambers had been by veto-proof majorities.
Among other things, the bill specifies that the “enforcement and servicing of real estate loans secured by mortgage or deed of trust or other security instrument shall be pursuant only to state and federal law.” It says that no local law or ordinance “may add to, change, delay enforcement, or interfere with, any loan agreement, security instrument, mortgage or deed of trust.”
That language would essentially strike down ordinances in St. Louis County and St. Louis. Those measures allow a homeowner in foreclosure to enter into mediation with the lender and a neutral third party. Besides requiring lenders to pay for mediation, St. Louis County’s ordinance set a $1,000 fine for a “person, firm or corporation convicted of violating any provision.”
Most of the provisions in the city and county’s ordinances are similar, although the city’s measure enacts a $500 fine for non-compliance.
Both ordinances are effectively frozen while lawsuits wind through the courts. But opponents of the measures -- including the Missouri Bankers Association and the Missouri Association of Realtors -- made Cox and Diehl's bill a major priority for the session.
In fact, Sam Licklinder -- a lobbyist for the Missouri Association of Realtors -- called the bill in a mass e-mail "critical" to "keep the real estate recovery growing."
"Local laws will burden consumers with higher financing costs and more stringent down payment, income and creditworthiness standards," Licklinder said in a Monday e-mail. "The result, fewer families in Missouri will be able to purchase homes."
Advocates of mediation note that while the process doesn't automatically stop a foreclosure, they say that it can catch mistakes and may keep people in their homes. But critics, including the Missouri Bankers Association, have argued that more regulations on lenders would lead to unintended consequences in the region’s housing market.
"St. Louis County and St. Louis City decided to make up their own laws and ignore the state law," said state Sen. Mike Cunningham, R-Rogersville, who handled the bill in the Senate. "It's created some chaos in the area. We've had lenders pulling out of the area because they don't know what laws to abide by. And in the long run, it's going to make it very difficult to get loans in that area.
"You can't have 114 counties and 961 cities or villages in the state of Missouri passing laws that have constant conflict," he added.
While Cox and Diehl's bill easily passed the House, the real showdown was expected to be in the Missouri Senate. That's because a number of Democratic senators told the Beacon they were opposed to the measure. That's significant because a group of senators can kill a bill – or force major changes – by a filibuster, in effect talking the bill to death.
But that didn't happen. While some Democratic senators -- including state Sen. Scott Sifton, D-Affton, Jamilah Nasheed, D-St. Louis, and Gina Walsh, D-Bellefontaine Neighbors -- spoke out against the bill, they did not lead a filibuster.
Walsh -- whose north St. Louis County Senate district was particularly hit hard by foreclosures -- said that the mediation is working.
"People are coming to the table," Walsh said. "It's not a hardship on the financial institutions. It's an inconvenience for the financial institutions. It's a hardship on the people who are losing their homes. That's where it's a hardship. And we need to understand the difference between the two."
Nasheed -- who unsuccessfully proposed an amendment requiring banks that took federal TARP funds to offer foreclosure mediation -- contended that financial institutions were not coming to the table when distressed homeowners needed assistance.
"I have homes that are vacant and abandoned in the 5th senatorial district," said Nasheed, who represents part of St. Louis. "That reduces the property values of others. And it's an unfortunate situation that we had to go through a major crisis. But I feel this way. If the banks in the state of Missouri, if they can receive monies for the federal government to bail them out, then why can't we look out for the small people?
"They just want to go into communication and dialogue in terms of how they can save their home -- that's all they want to do with the banks," she added. "And the banks are saying, no we don't want to do that."
Although Nixon could veto Cox and Diehl's bill, the measure passed both chambers by big enough margins to overrule his objection.
St. Louis County Executive Charlie Dooley -- a major proponent of foreclosure mediation ordinances -- told reporters last month that St. Louis County may file a lawsuit to strike down the state legislation.
Maggie Crane, a spokeswoman for St. Louis Mayor Francis Slay, said in an e-mail that city's chief executive was dismayed with the legislature's move.
"We're very disappointed that this bill passed and will consider our options on how best to move forward in hopes of keeping our ordinance (and that of the County's) on the books," Crane said.