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Bill targeting local foreclosure mediation ordinances passes state House

In Backroom

10:49 am on Fri, 04.05.13

A bill that would effectively nullify foreclosure mediation ordinances in St. Louis and St. Louis County is on its way to the Senate.

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. The House voted by a 130-24 margin on Thursday to send the measure to the Senate.

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. Both of the ordinances are effectively frozen while lawsuits wind through the courts.

The ordinances would 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’ ordinance would set a $500 fine for a “person, firm or corporation convicted of violating any provision.” Most of the city’s provisions are similar to an ordinance in St. Louis County, although the county’s measure enacts a $1,000 fine for non-compliance.

While advocates of mediation note that the process doesn't automatically stop a foreclosure, they say that it can catch mistakes and may keep people in their home. 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.

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.

Stanley Cox
Stanley Cox

In an interview, Cox said, “Most of the reps look at this issue and maybe are a little bit surprised that the relationship between a lender and borrower in a deed of trust situation is even a local issue.” Still, he said was expecting more pushback – because Dooley and St. Louis Mayor Francis Slay strongly support the programs.

“My argument is that to have 115 or more local ordinances might in fact hurt the consumer. And this is pro-consumer legislation,” Cox said. “There were people I didn’t persuade, obviously. But it was a very brief debate.”

While the bill didn’t face much trouble in the House, it could face a stiffer challenge in the Missouri Senate.

That’s because at least four state senators – Sens. Gina Walsh, D-Bellefontaine Neighbors, Joe Keaveny, D-St. Louis, Maria Chappelle-Nadal, D-University City, and Jamilah Nasheed, D-St. Louis – told the Beacon this year that they’re opposed to Cox and Diehl’s bill. That’s notable, because a group of senators can kill a bill – or force major changes – through the filibuster.

Jamilah Nasheed
Jamilah Nasheed
Gina Walsh
Gina Walsh

In fact, Walsh and Nasheed either sponsored or  supported statewide foreclosure mediation programs. Those efforts failed in the Missouri General Assembly, which is one reason advocates sought to institute the programs on a local level.

“It’s really puzzling for a person to even think of wanting to nullify the foreclosure legislation that was pushed in the county,” Nasheed told the Beacon earlier this year. “I don’t understand the logic of people. Sometimes people can be just so heartless, and it’s really unfortunate.

“I’ll tell you this, they’ll have a fight on their hands,” she added.

Asked how his bill would fare in the Senate, Cox said that he believed that “a comfortable majority of senators thinks that this is good legislation.

“I would think that it would be supported pretty widely,” Cox said. “The question will come down to whether somebody decides they’re willing to go to the full filibuster route. I don’t know. I would hope that they wouldn’t. But I don’t really profess to have a great understanding of the Senate.

“I would be surprised if a large majority of the Senate didn’t think this was good legislation,” he added. 

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