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Court tosses county’s foreclosure mediation ordinance

The Missouri Supreme Court on Wednesday said a St. Louis County foreclosure mediation ordinance, which lawmakers overrode in 2013, was never valid to begin with.

The St. Louis County Council had adopted the Mortgage Foreclosure Intervention Code in August 2012 to address the “residential property foreclosure crisis,” according to court documents. The ordinance started a mediation program and required lenders to provide homeowners with written notice of the foreclosure, mediation process and the homeowner’s right to request mediation.  The ordinance also required lenders to pay a fee and set criminal penalties for not complying.

The Missouri Bankers Association and Jonesburg State Bank sued in September 2012, claiming that the ordinance conflicted with state statutes and violated Missouri constitutional restrictions on charter county authority, among other things.

The St. Louis County Circuit Court issued a temporary restraining order on the ordinance, but ultimately dissolved the order and sustained the county’s motion for a summary judgment, holding that the county held the charter authority to enact the foreclosure ordinance and the ordinance was not preempted by state law.

The bankers appealed the ruling. In the meantime, a new state law went into effect in August 2013 that barred local laws or ordinances regulating the enforcement and servicing of real estate loans.

St. Louis County argued that the new law made the suit moot, since the county already had stated it wouldn’t enforce the ordinance going forward. But the county also argued that the ordinance remained valid because of its charter authority.

In a 6-1 decision, the Missouri Supreme Court ruled that St. Louis County had exceeded its charter authority and that the ordinance was void and unenforceable from its implementation. The court reversed the circuit court ruling and remanded the case but ruled that the bankers weren’t entitled to fees.

Judge Richard Teitelman dissented, writing that he thought the ordinance was a “valid exercise of the County’s legislative power because the ordinance is precisely tailored to the local symptoms of the foreclosure crisis.”

The case is Missouri Bankers Association v. St. Louis County, SC93848.