Dear Governor Nixon:
I am writing to urge you to veto HB446, anti-foreclosure mediation legislation. I am an expert on mediation and have been intimately involved in home foreclosure mediation for several years. I assisted St. Louis County and St. Louis City in the development of their foreclosure mediation ordinances.
Ten reasons why you should veto the anti-foreclosure mediation legislation:
Missouri has the 5th fastest foreclosure rate in the country and home foreclosures continue to be a crisis in Missouri. While foreclosures are down in some parts of the country, they are up in Missouri. See 2012 data: https://www.stlbeacon.org/#!/content/28915/foreclosures_2012_yearend
Everybody loses when there is a foreclosure. Each foreclosure costs municipalities almost $20,000 in lost property taxes and increased costs for police, fire, emergency and social services, per the US Congress Joint Economic Committee. Each foreclosure displaces a homeowner, decreases the economic value of surrounding homes within 1/8 of a mile, and precipitates an increase in crime. Foreclosure-displaced children perform poorly in school and have lower graduation rates. Each foreclosure costs mortgage lenders and investors on average $75,000 -$100,000, according to the Center for American Progress.
St. Louis County and St. Louis City adopted home foreclosure mediation ordinances to address the home foreclosure crisis. St Louis County has experienced 4,000 foreclosures per year since the start of the housing market crash in 2007, at a cost of approximately $80M/year, almost a half a billion dollars since 2007! St. Louis City has experienced 1,000 foreclosures per year since 2007, at a cost of approximately $20M/year. This is a state-wide problem. Kansas City, Independence, Columbia and other municipalities also have been devastated by home foreclosures. Three of the top foreclosure zip codes are in Kansas City.
Successful home foreclosure mediation programs have been in operation in 28 states (both judicial and non-judicial) since 2008. These programs require the lender to meet with the homeowner/borrower once prior to foreclosure, if the borrower opts into the program. This is especially crucial in non-judicial states like Missouri where there is no judicial oversight. The mediation program does not require a settlement. If the parties do not reach a settlement, the foreclosure proceeds.
Mediation programs do not significantly interfere with or slow down the foreclosure process. Mediation typically occurs within 60 days of the notice of foreclosure. In many cases, mediation actually speeds up the process – especially in neighborhoods where home values aren’t going up. Lenders are frequently holding foreclosed properties for much longer than would be the case with a negotiated short sale or modification that keeps a family in their home.
Only the Missouri Bankers Association challenged the ordinances in court and supported the anti-mediation legislation, and they represent a very, very small percentage of the mortgages in Missouri. None of the top mortgage lenders in the State – PNC, B of A, Chase, and Ocwen (formerly GMAC) – challenged, in large part, because they are already participating in similar mediation programs in nearby states and across the country.
The St. Louis County mediation ordinance worked. During the 60+ days between the effective date of the ordinance, Nov 15, 2012, and Jan 18, 2013, when the Court of Appeals granted a belated stay, almost 900 notices of foreclosure in St. Louis County were mailed to homeowners. All lenders complied with the $100 filing fee and all lenders provided notices to the borrowers of the right to mediation with their notices of foreclosure. Approximately 30% of affected borrowers opted for mediation. Two noticeable outcomes: 1) Lenders cancelled 40 foreclosures either because the borrower paid or the lender decided to work with the borrower though loss mitigation. 2) Of the first 20 mediations completed, 12 resulted in settlements with 9 loan modifications, 1 short sale, 1 forbearance agreement, and 1 bankruptcy; only 8 proceeded to foreclosure.
Municipal foreclosure mediation ordinances have been upheld by the courts. Providence, Rhode Island, and Springfield, Massachusetts, adopted home foreclosure mediation ordinances that were upheld against legal challenges. The state superior court in RI in 2009 and the federal district court in Massachusetts in 2012 both found that the ordinances were legal and not preempted by state law. The judge in St. Louis County upheld the County ordinance in November 2012.
Evidence nationwide shows that mediation programs help distressed homeowners stay in their homes and impose a smaller loss on lenders than does foreclosure – a win for the homeowner, the lender, and the State economy. According to the Federal Reserve Bank of Boston, “Foreclosure mediation appears to be one of the most effective foreclosure-prevention tools available to states and municipalities.” http://www.bostonfed.org/commdev/c&b/2012/fall/role-of-mediation-in-fore... Given that everybody loses when there is a foreclosure, why should we preclude a proven avenue for success? Aren’t Missouri homes worth saving?
The Missouri Legislature has taken no action since 2007 to remedy the state-wide hosing crisis. There are no other solutions on the table!
I am happy to talk with you further.
Best wishes,
Karen Tokarz
