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Missouri legislation would abolish foreclosure mediation in the city and county

A bill to abolish mandatory foreclosure mediation in St. Louis and St. Louis County is nearing passage in the Missouri Legislature, to the chagrin of housing advocates.

The bill would kill a system in which homeowners can demand a final, face-to-face meeting with the lender and a mediator before their house is taken in foreclosure.

The bill caught foreclosure counselors by surprise.

“It kind of sneaked its way through the Legislature and only caught our eye last week,” said Karen Wallensak, director of Catholic Charities community services.

The bill, sponsored by Majority Leader John Diehl, R-Town and Country, passed the House by a 130 to 24 vote on April 4. A Senate committee approved it, and it is now awaiting a full Senate vote. The bill would forbid local governments from regulating real estate loans.

St. Louis and St. Louis County mediation rules give homeowners a final chance to persuade bankers to reduce monthly mortgage payments, rather than take the house. The mediation requirements have been blocked temporarily by the courts pending a legal challenge from bankers.

The banking industry tries to work out modifications, reducing payments when possible, but many homeowners don’t have enough income. Bankers say mediation simply adds costs and delays inevitable foreclosures.

Troubled homeowners can’t afford to maintain their property, which hurts the neighborhood, said Harry Gallagher, president of the Mortgage Bankers Association of Missouri. Stretching out the process also hurts the homeowner, he said. “For their own sakes, it’s better to get this behind them and move on,” Gallagher said.

But Helen Rattler thinks mediation saved her Jennings house. She was one of the first to ask for mediation, before courts blocked the program.

Rattler said she fell behind on her mortgage after losing her job. She found work again, but took a pay cut. She couldn’t catch up with the missed payments and penalties.

She said she called her lender to explain the problem, and was surprised to get a foreclosure notice. She went to Beyond Housing, which counsels troubled homeowners, and asked for mediation. The counselors helped her prepare a budget, and put together records proving her income.

“In the meeting, there were lawyers for the bank, the mediator and representative from Beyond Housing,” she recalled. “They lowered my payment on a three-month trial basis. I couldn’t be late or miss a payment. I just made my fourth payment today,” she said.

The County Council and city aldermen passed mediation ordinances amid tales of chaos in the mortgage servicing business as foreclosures mounted. Homeowners behind on payments complained of paperwork lost at mortgage servicers, long delays and contradictory decisions as they sought payment reductions, mainly over the phone.

The city and county ordinances let homeowners demand a face-to-face meeting if the bank is in town, a telephone conference if it’s not. A professional mediator tries to work out a solution.

Banks pay $350 for the mediation. The mediator can’t stop a foreclosure. But banks face $1,000 fines under the county ordinance if they refuse to mediate, or if the mediator says the bankers acted in bad faith. The fine in the city is $500.

Beyond Housing says 950 foreclosure cases were filed between the time the county ordinance took effect in 2012 and when the court blocked it. Of those, 274 homeowners demanded mediation. Forty mediations were held and all but three produced an agreement, according to Beyond Housing.

Mediation is good for lenders, because they lose less in a modification than in a foreclosure, argues Beyond Housing CEO Chris Krehmeyer. Foreclosed homes routinely sell for 30 percent less than comparable houses, and banks also pay legal and maintenance fees for homes they take.

“Even if you save one in 20 families, financially you’re still ahead,” Krehmeyer said. “We’ve got people losing houses that they shouldn’t.”

Article source: http://www.stltoday.com/business/local/missouri-legislation-would-abolish-foreclosure-mediation-in-the-city-and/article_d1ee690f-b4de-56f9-add7-d0de7252089f.html

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