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Economy & Business

Appeals court freezes St. Louis County foreclosure mediation ordinance

This article first appeared in the St. Louis Beacon, Jan. 18, 2013 - The Missouri Court of Appeals Eastern District froze St. Louis County’s foreclosure mediation ordinance, a move that prohibits the county from enforcing the measure for the next few months.

The law, which the St. Louis County Council passed last August and amended in the fall of last year, allows a homeowner facing foreclosure to enter mediation with the lender and servicer of a loan. Mediation involves a homeowner, lender and servicer meeting with a third party such as U.S. Arbitration and Mediation. The ordinance, which makes lenders and servicers pay for the mediation, would impose penalties if lenders don’t participate.

Groups such as the Missouri Bankers Association decried the measure as an additional layer of regulation on lending institutions. Opponents – including the St. Louis Association of REALTORS – said the measure could have unintended consequences on real estate markets. The MBA was the lead plaintiff in a lawsuit aimed at throwing the law out. St. Louis County associate circuit judge Brenda Stith Loftin upheld the measure, which prompted an appeal.

Missouri Court of Appeals Judge Robert Clayton III issued an order on Friday barring “St. Louis County, its agents, servants, employees and attorneys and those in active concert or participation, as well as Charlie A. Dooley, in his official capacity as County Executive” from enforcing the law. He then placed the case on the court’s April oral arguments calendar.

The result of that decision, said St. Louis County counselor Pat Redington, is that it “does put the program on hold” until the court rules later this year.

“That’s disappointing, because we’ve had successful mediations since we started several months ago,” Redington said. “We’d like to continue with it. But court said ‘stop.’”

The litigation's end result could have ramifications beyond St. Louis County. Depending on the outcome, it could provide insight over whether local jurisdictions, especially counties with charter forms of government, can set up foreclosure mediation programs. A St. Louis Board of Aldermen committee, for instance, approved a bill earlier this week.

The ability for local entities to set up these types of programs is critical, since the Missouri General Assembly hasn’t moved on legislation to establish foreclosure mediation programs statewide.

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