Since the beginning of the recession, mounting foreclosures have plagued thousands of communities across the United States. In St. Louis County, nearly 2,000 homes have been foreclosed in 2012. As you may already know foreclosures have reached epidemic proportions in North County and parts of South County have fallen prey to foreclosure. As houses are abandoned, crime and lowered property values are left in their wake.
Being a non-judicial state, Missouri has one of the fastest foreclosure rates in the country. In judicial states, court actions are required for foreclosing on homes. People often lose their homes within five months of falling behind on their mortgages in the State of Missouri.
To curtail the crisis, St. Louis County Councilwoman Hazel Erby (D-University City) proposed the Mortgage Foreclosure Intervention Code, a bill requiring foreclosure mediation of all homes with loans in default in St. Louis County. This bold measure requires mortgage lenders to offer defaulting homeowners foreclosure mediation prior to foreclosure. The Council recently gave approval to this ordinance with a 5-2 vote.
This code requires mortgage lenders to pay for mediation services to take place between themselves and the homeowners. Defaulted homeowners will have 30 days to respond in writing to a Notice of Mediation that will be sent from the mediation coordinator. Once this response is received, homeowners will be able to negotiate in good faith with their lenders and qualified housing counselors to resolve the defaulted loan.
According to the Center for Responsible Lending, foreclosure prevention programs ensure communication and negotiation between parties, levels the playing field by incorporating an experienced third party negotiator into the process and provides increased oversight and transparency to loan modification efforts.
Following Nevada’s enactment of mandatory foreclosure mediation in 2009, the state’s nationwide foreclosure rankings fell to 6th from 1st place in 2008. In Connecticut and New York, over 70 percent of homes went into foreclosure mediation proceedings. Of these percentages, 62 percent of homes were saved through permanent modifications in New York.
In states where mediations were not mandatory, less than 20 percent of troubled homeowners received help. So as you can see, mandatory foreclosure mediations are crucial to helping troubled homeowners find the help they need to keep their homes.
Since this measure has now passed into law in St. Louis County, defaulted homeowners will now be offered mediation services at no cost. It is important to remember that homeowners will only have 20 days to respond to the notices in order to save their homes.
Housing counseling agencies such as the Urban League, Beyond Housing, Catholic Charities and Better Family Life offer free help to those who are late on their mortgages. Those who are having problems maintaining their mortgages should seek help as soon as possible.
Missouri is one of the fastest states in terms of foreclosure processing. According to research conducted by the University of Missouri-St. Louis, most foreclosures in the state of Missouri occur during a timeline of 60 days, which ranks it near the top in the nation. With that said, it is critical to allow homeowners in our region the necessary time to assert resources when faced with losing their home. The utilization of a third-party mediator and strategic intervention of housing counseling can help more families remains in their home.
The Urban League’s support of this policy is premised on the need to help homeowners retain the dream of homeownership. The Urban League provides leadership to the St. Louis Foreclosure Intervention Task Force. The mission of the St. Louis Foreclosure Intervention Task Force is to “develop and implement strategies that decrease the number of foreclosures, which will preserve homeownership for families and stabilize neighborhoods in the St. Louis region.”
Foreclosure mediation for St. Louis County will serve as a model for the region and this mission will continue to reverberate to each block and neighborhood. Each family that avoids foreclosure equates to one less family having to change school districts, one less vacant home which stifles home values, and a neighborhood that progresses towards stabilization for years to come.
Next, the necessitude to strengthen the lines of communications between the servicer and borrower is an essential element of avoiding foreclosures. For years through this housing crisis, our housing counselors have heard the cries of homeowners not being able to effectively communicate with their servicer or lender. Homeowners would send documents and would have to send them again or call and not reach the same point of contact. For homeowners who have not met with a housing counselor and/or mediator, have they been made aware of all of their options, whether it is a loan modification, unemployment forbearance, repayment plan, deed-in-lieu or short sale?
And lastly, foreclosure scams are still out there. While there are reputable HUD-certified housing counseling agencies such as the Urban League that provide foreclosure intervention counseling for free, there are several unscrupulous entities that charge outrageous costs and fees and don’t deliver, while “guaranteeing” loan modifications and interest rates. As housing counseling agencies we have to reach homeowners before these predators reach them. Before a family spends the last of their resources on these loan rescue scams, homeowners must be directed to agencies that will hold their best interests.
The passage of this bill is historic and will help keep more homeowners in their home, provide more financial/housing options, and bring all parties to the table to discuss the single most investment most of us will make in our lives – our home.
