This article originally appeared in the St. Louis Beacon. - The St. Louis County Council gave initial approval to an ordinance setting up a foreclosure mediation process, an issue that drew passionate testimony from advocates of distressed homeowners and criticism from those who question the proposal's legality.
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 would prompt lenders and servicers to pay for the mediation – would have penalties if lenders don’t participate.
While mediation doesn’t guarantee that a foreclosure will stop, proponents argue that the measure could slow the process down and prevent mistakes from happening. In general, foreclosures take longer in "judicial" states – such as Illinois – that 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 financial obligation.
Erby’s ordinance was "perfected" by a 5-2 margin, with Councilmembers Colleen Wasinger, R-Town and Country, and Greg Quinn, R-Ballwin, voting against it. It needs another vote before going to St. Louis County Executive Charlie Dooley for his signature.
While some groups such as the Missouri Banking Association questioned whether St. Louis County has the authority to carry out the proposal, Dooley indicated in July that he supported the ordinance. And he reiterated that support during roll call vote on the measure.
“When you hear people, working people, [tell] stories like you’ve heard this evening about having the money to actually pay and they still don’t get the necessary service, something is wrong with the system,” Dooley said.
Emotional testimony
St. Louis County Planning Department director Glenn Powers noted how foreclosures had cropped up through most of north St. Louis County and parts of southern St. Louis County. He said the county had 4,540 foreclosures in 2010 and has had 1,980 foreclosures thus far in 2012.
St. Louis County Assessor Jake Zimmerman also noted that foreclosures were occurring in more affluent areas, such as condominiums in Clayton.
Beyond the emotional heartache of losing a home for a homeowner, Powers said foreclosures have had a ripple effect on the surrounding area. That includes, he said, more use of government services to fight increased crime and lower revenue to the county.
Throughout Tuesday afternoon, council members heard at times emotional testimony, including from county residents such as Wanda Combs, who had nearly lost her home during the foreclosure process.
Combs said with the help of the Urban League, she was able to stabilize her situation by keeping in contact with her lender. And that sort of communication, she said, is “desperately needed” for people going through similar situations.
“It’s just unbelievable what people are going through. Losing their homes – affecting health and family and everything else," Combs said. "So I would just say that we desperately need this type of mediation for the state of Missouri just across the board.”
Other proponents included representatives from advocacy organizations such as Beyond Housing, professors from Washington University and St. Louis University, and members of Metropolitan Congregations United.
“We have three particular clusters in MCU, and North County is sitting in ground zero,” said Susan Sneed, an organizer for MCU. “The people in our congregations are surrounded by empty houses. We have congregations who have lost people who have had to move away. So it was a very close issue for all of us. And we wanted to do something.”
Groups like MCU had supported legislation in the Missouri General Assembly that would have allowed a homeowner to convert a non-judicial foreclosure to a judicial one by filing a petition with the circuit court. It would have also required the Division of Finance to establish a foreclosure dispute resolution program.
Although those legislative efforts had been stymied, Sneed said the county’s passage could send a message across the state.
“I think other counties are going to look at St. Louis County and wonder if they could do it for themselves,” Sneed said. “And then people are going to be able to ask that question again ‘why can’t we do this at a state level.’ And it may bring it all back up again next session and try it again next session to have a state mediation panel.”
All five Democrats on the council expressed support for the ordinance, including Councilwoman Kathleen Kelly Burkett. The Overland Democrat – whose financial problems came into public view earlier this year – noted that her late mother’s home went into foreclosure, adding that the experience was harrowing.
“I was out of a job and couldn’t handle my own house and hers too,” Burkett said. “The bottom line is it had to go back into foreclosure and we lost the home. But the house stayed vacant for quite a while. And during that time, vandals came in and tore out the copper piping in the basement and so on and so forth. I’ll probably tear up just talking about it – it broke my heart to see my family home tore up that way.”
She added “maybe part of it was my own problem because I was so involved in my own financial situation of being out of work, but I certainly would have appreciated at that time … if anybody had taken the time to help me with that.”
“I think that something has to be done,” Burkett said. “Whether this is the correct one or not, I don’t know. But I’ve dealt with it on a personal level and I know what it’s like. And it is not pleasant.”
Questions about ordinance’s legality
Critics of the proposal -- including representatives from the Missouri Bankers Association and the Missouri Mortgage Banking Association – argued that the ordinance could have unintended consequences.
Celeste Rueter, governmental affairs director for the St. Louis Association of REALTORS, said she was concerned that the ordinance “sets the county apart from other jurisdictions.”
“If a lender knows there are more processes they have to go through in a certain place versus other places, it will affect pricing on loans,” Rueter said. “And that could affect the number of buyers that are available. If the buyer pool is smaller, it’s more difficult to sell your home. And that affects our sellers.”
Keith Thornburg, vice president and general counsel with the Missouri Bankers Association, argued that the ordinance may violate parts of the Missouri Constitution, including the taking of private contract rights. He also questioned whether the county had the authority to enact such an ordinance.
This is simply beyond the realm of a county charter’s authority to override or add to state law,” Thornburg said. “And state law governs the recorders’ offices, property conveyances, security agreements on real estate lending. So they’re just adding or override state law on this, and that’s simply beyond what a charter county could do.”
Thornburg added though it would be “premature” to say whether his group would sue to try to overturn the ordinance if it goes into effect.
After the deluge of testimony, it appeared that the measure would be shelved for more study by councilmembers. But after noting that a great deal of time had been spent fine-tuning the ordinance’s details, Erby called for a vote.
“We don’t have five years for a committee to come up with something,” Erby said. “There has been no solution up to this point, so we need to move ahead. If there’s a negative impact on the county or lending or whatever, I’m sure everybody’s willing to revisit it and amend it or whatever we have to do.”
When it came time for him to vote, Quinn expressed grave doubts about whether the ordinance could survive if it was challenged in court. He noted the county “hasn’t had the best record” in prevailing against lawsuits, most likely a reference to a recent adverse ruling on trash districts.
“I’m not at all convinced that this will pass muster in the courts,” Quinn said. “The county will end up with a substantial judgment.”
But Beyond Housing executive director Chris Krehmeyer, a major proponent of the Erby’s proposal, said the arguments against the proposal “frankly had no weight.”
As for potential litigation, he said “there’s always a chance it could be challenge.” But he said litigation to overturn an ordinance in Rhode Island failed, even though it’s a non-judicial state.
Dooley added that “anything this council does, there’s always a possibility of litigation.”
“There’s no question about that. There’s always a possibility of that,” Dooley said. “That’s why we have lawyers. They’re good lawyers, too. But as we go forward, there are some things I’m willing to challenge and test that thing out. Because I think when we don’t test the system, we do ourselves an injustice.”
