On August 28, 2012, the St. Louis County Council passed the Mortgage Foreclosure Intervention Code [pdf link], an ordinance that requires lenders to offer mediation to homeowners before foreclosing on property. The ordinance, which becomes effective on September 28, 2012, could potentially change the long-standing timeline of non-judicial foreclosures in St. Louis County, in a manner inconsistent with Missouri state law. In fact, the ordinance is already being challenged in a class action lawsuit [pdf link] filed by The Business Bank of Saint Louis.
Under Missouri’s foreclosure statutes, non-judicial foreclosures in St. Louis County need to comply with two requirements: (1) a Notice of Foreclosure must be sent to a defaulting borrower at least 20 days before sale; and (2) the Notice of Foreclosure must be published at least 20 times, continuing to the date of sale, in a daily newspaper in the county in which the property is situated. A trustee conducting a St. Louis County foreclosure sale typically sends the defaulting borrower notice 20 days in advance of the sale, publishes the notice of sale in the newspaper for 21 days, and then conducts the foreclosure sale on the 21st day of publication.
However, in order to comply with St. Louis County’s new ordinance, the following additional requirements must be met to effectuate a non-judicial foreclosure:
- A Notice of Mediation must be sent concurrently with the Notice of Foreclosure, advising the homeowner of the right to request mediation within 20 days (Sec. 727.400(1))
- Homeowners have 20 days from the date notice was mailed to request mediation (Sec. 727.400(2))
- If the homeowner requests mediation, mediation will be scheduled within 60 days of the date of the notice (Sec. 727.500(1))
- A Certificate of Compliance with the ordinance must be filed contemporaneously with the trustee’s foreclosure deed (Sec. 727.700)
Aside from the clear inconsistency between: (a) the amount of time the ordinance allows for mediation (up to 60 days); and (b) the state law foreclosure notice period (20 days), the ordinance expressly states that it does not prohibit a lender from carrying out a non-judicial foreclosure sale pursuant to Missouri state law. However, if a foreclosing lender complies with the new St. Louis County ordinance, and a homeowner requests mediation, the foreclosure process could take up to 60 days. Therefore, complying with the ordinance would mean a lender could be faced with the choice of either: (1) canceling the scheduled sale date and, if mediation is unsuccessful, restart notice and publication after the mediation, thereby incurring additional publication expense; or (2) continuing with the originally advertised sale date, but be unable to include a Certificate of Compliance with the trustee’s deed until the conclusion of mediation.
The Business Bank of Saint Louis’ petition challenging the ordinance argues that St. Louis County’s foreclosure mediation program impedes Missouri’s current foreclosure process, which the bank says already adequately protects borrowers. The bank further argues the ordinance’s extended time-line is inconsistent with existing state foreclosure laws, and therefore, violates Section 362.109, RSMo. prohibiting ordinances from being more restrictive than state statutes governing entities registered by the division of finance or the division of credit unions.
We will follow up with updates as the case progresses.