Home, business foreclosures suspended due to flooding in Missouri

St. Louis Daily Record & St. Louis Countian, Jun 30, 2008 by Angela Riley

The flooding of northeast Missouri and parts of St. Charles County has had a surprising effect on foreclosures: they've decreased.

Since the flooding, FEMA has begun declaring parts of Missouri disaster areas. Missouri Gov. Matt Blunt followed suit and also named additional counties disaster areas. In response, many mortgage companies are suspending foreclosures and sales of property in those areas for 30 or 90 days.

The U.S. Department of Housing and Urban Development has announced that it will offer foreclosure protection to displaced families through a 90-day moratorium on foreclosures of Federal Housing Administration insured home mortgages. However, this does not apply to non-FHA insured mortgages.

The HUD strongly recommends that loan services take such actions as special forbearance, loan modification, refinancing, and waiver of late charges.

Wes Kozeny, partner at Kozeny & McCubbin, said that his firm's clients are varying on their approach on how to handle to disaster.

"It varies from client to client, but we're seeing that many are typically suspending foreclosures for 90 days in areas that FEMA has declared a disaster area and are suspending foreclosures for 30 days in the areas that Missouri declared," he said.

There is no law governing how mortgage companies have to respond to natural disasters, but many find it in their best interests to postpone action. Many houses could be underwater or sustaining water damage. This makes it difficult for them to sell the homes as additional valuations and insurance inspections need to be done.

Kozeny gives an additional reason his clients are extending grace periods.

"They're being good corporate citizens," he said. "It's not unusual to see them responding to natural disasters and it's the right thing to do."

It isn't surprising that some law firms are seeing a decrease in its foreclosure work.

"This isn't going to hurt us at all," Kozeny said. "There will be a little bit of a dip in business, but we're probably going to be seeing a spike in business after these time periods are up. Assuming that the loans are in default now, they are still going to be in default after the time periods and will need to be foreclosed. This is a fairly acute disaster. Rivers are going to crest this week and clean up will occur. It'll be business as usual by end of quarter."

Despite not seeing drastic changes to business, Kozeny and McCubbin are advising staff to take their summer vacations while the work is still slow.

Not all law firms that handle foreclosure work are seeing a dip.

"We haven't had our clients suspend foreclosures," said Andy Neill partner at Kappel, Neill & Wolff in Clayton. "We don't really deal with the areas affected, but that could change."

Federal, state and local officials last week took a number of other actions to assist flood victims. President George W. Bush on Wednesday declared a major disaster exists in Missouri, and ordered federal aid to supplement state and local recovery efforts.

Among the actions taken by Gov. Matt Blunt is the ordering of damage assessments, which will help pave the way for individual assistance and hazard mitigation grant funding and low-interest loans from the federal Small Business Administration.

St. Charles County Assessor Scott Shipman last week said residents who own property that is declared uninhabitable because of the flood will be eligible for property tax relief on a pro-rated basis. State law says that upon application of the property owner, the assessor must remove on a pro-rata basis from the tax book for the year any residential property improvements destroyed by a natural disaster, according to the assessor.

Shipman said the property would have to be deemed uninhabitable by a city, the county or some other governmental body before it could be removed from the tax book.

St. Charles managing editor Mike Trask contributed to this report.