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VOL. 125 | NO. 46 | Tuesday, March 09, 2010

Bills Could Help Slow Foreclosures

By Andy Meek

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Sitting lenders down with borrowers in danger of losing their homes to foreclosure is the goal of a pilot program that would be created by pending state legislation.

Lawmakers from Memphis are sponsoring companion bills in the state House and Senate that, among other things, would set up a foreclosure mediation program in Shelby County.

The goal of the program is simple. Before resorting to foreclosure, lenders and homeowners would be authorized to try to strike a deal that lets borrowers keep their homes from the auction block.

The legislation also includes a framework under which a mediator can be chosen to help negotiate disagreements.

“Essentially, what the bill is aimed at is creating a pilot program in Shelby County that would be voluntary initially and would provide some incentives for lenders and servicers under the Tennessee Home Loan Protection Act to participate in the program,” said Memphis attorney Webb Brewer.

Brewer, the former director of advocacy for Memphis Area Legal Services, has started a new law practice focused almost exclusively on social justice legal issues such as urban blight and predatory lending.

That explains his interest in helping craft the legislative language setting out the foreclosure mediation program, which for now would only exist in Shelby County.

He’s also one of the lead attorneys representing Memphis and Shelby County in a lawsuit against lending giant Wells Fargo. It was filed at the end of 2009 over what the city and county allege are dubious lending practices that targeted black homeowners in Shelby County.

The suit is in a holding pattern at the moment. Attorneys for Wells Fargo are preparing their response, which is expected to include a motion to dismiss the action.

“This is not directly related to our lawsuit, but it’s related in a way,” Brewer said of the mediation program. “Because one of our primary objectives in the lawsuit is to get an effective mediation program to try to put a tourniquet on the foreclosures that are happening.”

Foreclosure mediation programs are popping up around the country and being employed in a variety of ways. One of the most dramatic responses to the problem emerged in Philadelphia more than a year ago, when Sheriff John Green stopped automatically enforcing foreclosure proceedings.

His office instead became a kind of one-stop-shop for homeowners who need to reach counselors and a variety of other housing aid. He made such help a priority before conducting foreclosure sales, an act that landed him on the front page of the Wall Street Journal in 2008.

In Shelby County, the problem over the past year or so has been trending downward, but thousands of homes are still sold each year on the steps of the Shelby County Courthouse. That means a corresponding number of homeowners and families whose lives are interrupted and spun off in unintended directions when mortgage payments become unsustainable.

Banks and lenders foreclosed on 11 percent fewer homes in 2009 than they did in 2008, according to real estate information company Chandler Reports, www.chandlerreports.com. A little more than 5,500 homes were seized in 2009, compared to 6,209 homes in 2008.

The Memphis City Council and the Shelby County Commission this week are scheduled to approve resolutions throwing the verbal support of each legislative body behind the mediation effort.

The council’s resolution is sponsored by councilman Jim Strickland. It simply reads that “the Memphis City Council is supportive of this legislation … and encourages its passage by the state Legislature.”

The County Commission’s resolution is several paragraphs long and paints a picture of an urban landscape scarred by the effects of foreclosure.

It notes how toward the start of the recession, homebuyers who financed their purchases with subprime mortgages were the likeliest to see their piece of the American Dream foreclosed.

Now, the resolution continues, families who didn’t overextend themselves are fueling Shelby County’s foreclosure numbers.

Chandler Reports is a division of The Daily News Publishing Co.

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RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 74 312 10,190
MORTGAGES 103 400 13,275
FORECLOSURE NOTICES 16 76 2,614
BUILDING PERMITS 221 783 24,307
BANKRUPTCIES 72 299 9,832
BUSINESS LICENSES 39 110 3,713
UTILITY CONNECTIONS 129 519 14,482
MARRIAGE LICENSES 13 81 3,144

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