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Board of Aldermen give final passage to foreclosure mediation ordinance

This article first appeared in the St. Louis Beacon, Feb. 8, 2013 - The St. Louis Board of Aldermen gave final passage to a bill allowing a homeowner going through foreclosure to enter into mediation with a lender.

The bill – sponsored by Board of Aldermen President Lewis Reed and co-sponsored by a number of aldermen – establishes a mediation process, which places a homeowner and a lender with a neutral third party. It passed the Board on Friday by a 16-8 vote, with one alderman abstaining.

St. Louis Mayor Francis Slay issued a statement last September noting that he was supportive of a legislative effort to set up a foreclosure mediation process.

Start of update: And Jeff Rainford, the mayor’s chief of staff, said on Friday afternoon that Slay will sign the bill that passed through the board.

“The reason we’re supportive of it is we’ve got very good relationships with all the businesses in the city – including the banks,” Rainford said. “We do not think this is punitive. We do not think this is overly bureaucratic. We think it’s common sense. And it’s something that we hope someday the lending community would embrace as good public policy.” End of update

In addition to prompting lenders to pay for the cost of mediation, the bill would set a $500 fine for a “person, firm or corporation convicted of violating any provision.” Most of the bill's provisions are similar to an ordinance passed in St. Louis County, although that measure enacts a $1,000 fine for not complying.

While advocates of mediation note that the process won’t automatically stop a foreclosure from going forward, they add that it can catch mistakes and potentially figure out an amenable solution to keep somebody in their home. They also note that similar programs have been set up elsewhere, such as Providence, R.I.

During debate on the bill in late January, Alderman Craig Schmid, D-18th Ward, described the measure as a “Hail Mary” pass to allow somebody going through foreclosure a chance to stay in their home.

“There are mediation programs throughout this country,” Schmid said. “It is not telling the bank that they have to do anything in particular, other than giving them an opportunity to mediate this and to work with their borrower.”

Critics of the proposal -- including the Missouri Bankers Association, the St. Louis Association of Realtors and the Missouri Mortgage Banking Association – have argued that placing additional regulations on lenders would provide unintended consequences to the region’s housing market.

The MBA is the lead plaintiff in a lawsuit aimed at throwing out the St. Louis County ordinance. A Missouri Court of Appeals judge froze the ordinance while that litigation was pending. St. Louis County Executive Charlie Dooley told reporters in January that 10 to 15 county residents had opted for mediation before the ordinance was put on hold.

Some – including Alderman Tom Villa, D-11th Ward – have questioned whether a local entity that can enact such an ordinance.

“I think the intentions of [the bill] are meritorious. It deals in a realm that unfortunately in the way our economy has gone has devolved into a quagmire. But I don’t think in the state of Missouri we can regulate banks,” said Villa at the board's Jan. 25 meeting. “As a result of that, just from an individual standpoint, although the intentions are meritorious, I think it’s too much government. And I don’t think we can do what this purports to do.”

Asked if it was prudent to impliment the city of St. Louis program while litigation against the St. Louis County ordinance hasn't been resolved, Rainford said "no, because you just can't tell what judges are going to do."

He said attorneys for the city and experts from Washington University are comfortable with the bill.

"Anything's possible in the courts, but both [sets of attorneys] are comfortable that it has been drafted in a legal way," Rainford said. "If we said 'well, let's not believe our lawyers' advice -- let's just stop and guess what the courts are going to do or wait for the courts,' that's just not how we do things."

In addition to the litigation in St. Louis County, the MBA is supporting legislation that would effectively ban local entities from setting up mediation programs. Rep. Stanley Cox’s bill received a hearing this week in the House Financial Institutions Committee.

Jason is the politics correspondent for St. Louis Public Radio.