This article first appeared in the St. Louis Beacon, March 6, 2013: A circuit judge slapped a temporary restraining order on St. Louis’ foreclosure mediation ordinance, effectively freezing the recently signed law for the time being.
On Tuesday, St. Louis Circuit Judge Robert Dierker ordered a 20-day hold on the ordinance, which St. Louis Mayor Francis Slay signed into law in late February. Dierker’s order barred the city “from enforcing the provisions of [the ordinance] provided that nothing herein shall be construed to prohibit voluntary participation in the program.” The Missouri Bankers Association and the Central Bank of Kansas City had sued to strike down the measure.
“In the court’s opinion, plaintiffs would suffer immediate, irreparable harm if the defendants are allowed to enforce the ordinance prior to a determination on the merits of the claims brought by plaintiffs,” Dierker wrote. “The harm resulting to the plaintiffs, if the requested relief is denied, far outweighs the potential harm to the defendants if such relief is granted, as the requested relief will serve only to maintain the status quo pending a determination on the merits.”
The ordinance would allow a homeowner in foreclosure to enter into mediation with the lender and a neutral third party. Besides requiring lenders to pay for mediation, the bill would set a $500 fine for a “person, firm or corporation convicted of violating any provision.” The bill is similar to an ordinance in St. Louis County, although that measure enacts a $1,000 fine for not complying.
While advocates of mediation note that the process doesn't automatically stop a foreclosure, they say that it can catch mistakes and potentially provide a solution for keeping somebody in their home. But critics – including the Missouri Bankers Association – have argued that more regulations on lenders would lead to unintended consequences in the region’s housing market. The MBA was also the lead plaintiff in a lawsuit against the St. Louis County ordinance, which the Missouri Court of Appeals froze earlier this year.
Start of update: Slay's spokeswoman Maggie Crane said in an e-mail to the Beacon that Dierker's order was "not surprising."
"The city expects that the TRO will be in place pending the outcome of the appellate litigation challenging the nearly identical ordinance in St. Louis County," Crane said. "That case, as you likely know, is scheduled for oral argument in the Missouri Court of Appeals April 3 and likely will go to the Missouri Supreme Court after that."
Crane added that no one went through mediation since the bill was signed into law a week ago. End of update.
After the St. Louis Board of Aldermen gave final approval to the program last month, the Beacon asked Slay chief of staff Jeff Rainford if it was prudent to implement the program while litigation against the county's ordinance was pending. Rainford said, "You just can't tell what judges are going to do," adding that attorneys for the city and experts from Washington University were comfortable with the ordinance's language.
In a statement after he signed the bill, Slay said foreclosures “present dangers to the health, safety and welfare of the public, thereby creating a public nuisance.”
“They hurt property values and interfere with the collection of real property taxes,” Slay said at the time. “It’s a serious concern, which municipal government cannot ignore.”
In addition to the litigation in St. Louis County, the MBA is supporting legislation to ban local governments from setting up mediation programs. The bill -- which is being handled by House Majority Leader John Diehl, R-Town and Country -- is still going through the committee process.
