This article first appeared in the St. Louis Beacon, Aug. 28, 2012 - The St. Louis County Council gave final passage Tuesday night to an ordinance setting up a foreclosure mediation process, a program proponents say could slow a fast-paced system down for distressed homeowners.
The proposal, sponsored by Councilwoman Hazel Erby, D-University City, allows a homeowner facing foreclosure to enter mediation with the lender and servicer of a loan. Mediation involves a homeowner, lender and servicer meeting with a third party such as United States Arbitration and Mediation. The ordinance, which asks lenders and servicers to pay $500 for the mediation, would impose penalties if lenders don’t participate.
In general, foreclosures take longer in "judicial" states, such as Illinois, which require court action to foreclose on a home. Non-judicial states, such as Missouri, require documentation to be filed through the appropriate channels showing that a homeowner isn't living up to his or her financial obligation.
While mediation won't necessarily stop a foreclosure, proponents of the ordinance say the measure could slow the process down and prevent mistakes. Backers include such organizations as Beyond Housing, university professors, religious organizations and homeowners stricken by foreclosures.
Councilmembers passed by a 5-2 margin a revised version of the ordinance that lowered the lenders’ filing fee to $100, changed the date the measure goes into effect and reduced the time a homeowner has to opt into the program to 20 days.
Erby said she hoped the program would have a transformative effect on communities hard-hit by foreclosures.
“It is my sincere hope that this new process will keep families in their homes, children in their schools and neighborhoods intact,” Erby said. “I know it will not save everyone from losing their home. But if we can keep some families from experiencing the heartache of foreclosure, then this will be a success.”
Critics of the proposal -- including representatives from the Missouri Bankers Association, the St. Louis Association of REALTORS and the Missouri Mortgage Banking Association – argued that the ordinance could harm potential homeowners. Others have questioned whether St. Louis County can legally enact the ordinance, arguing among other things that the state legislature has authority over banking regulations.
Councilman Greg Quinn, R-Ballwin, and Councilwoman Colleen Wasinger, R-Town and Country, voted against the measure. Quinn told reporters after the vote that the program will hurt more people than it will help.
“What it’s going to do is it’s going to impose another governmental regulatory program,” Quinn said. “It’s going to go ahead and increase the costs of the lenders to go through this mediation process. And those costs have to be passed along. And what it’s likely to do is to make mortgages less available for people. And that’s going to hurt the very people it was intended to help.”
Quinn added that regardless of whether the program survives legal challenges, it will “help very few people, but it’s likely to hurt many, many more people because of the costs of lending. Right now, credit is very hard to get, and I think it’s going to make it harder to get because of the increased cost of lending.”
The ordinance now goes to St. Louis County Executive Charlie Dooley, who said in July that he supported Erby’s ordinance. He said earlier this month that even though the program may be challenged in court, Dooley added, “When we don’t test the system, we do ourselves an injustice.”
