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Missouri Banks Sue St. Louis County Over Mediation Ordinance

Tuesday, September, 25, 2012

The Business Bank of St. Louis recently sued St. Louis County on behalf of nearly 300 banks throughout the state of Missouri. The suit claims that the county has overstepped its authority by requiring banks to enter into a single mediation session before foreclosing on homes.

What Is the Real Estate Mediation Ordinance?

The ordinance requires that banks enter into a single mediation session with the owner(s) of each property before closing on that property. Each bank is required to pay for the mediation services, as well as supply its own mediation attorney who has the power to cut a deal.

This type of measure has been implemented all over the country, from the East Coast all the way to Oregon—including Illinois, just across the Mississippi River from St. Louis.

Mandatory mediation has been hailed as an important consumer protection measure, and according to supporters, has had to adverse effect on either the economy, or on the ability for new homeowners to secure home loans.

The Banks' Arguments Against Mediation Services

Bank executives argued that, despite results to the contrary in other areas, the mediation ordinance would have a “chilling” effect on potential new homeowners' abilities to secure home loans.

Now, commercial banks across the state are challenging the ruling in county court. They aren't all filing separately. Rather, the Business Bank of St. Louis is filing on behalf of 272 banks all over the state.

The banks are claiming that the ordinance denies them their “right to choose when and how to exercise a lawful foreclosure remedy” that was granted them by the state.

Will the Suit Against Civil Mediation Stand?

The ordinance bill's sponsor, City Councilwoman Hazel Erby from University City, said that she feels like the law is a good one, and that it will stand up in court.

John Davidson, attorney for the bank, said he offered to compromise with the city. “I said we will go away if you do not apply this to commercial loans,” he claims.

Councilwoman Erby introduced new legislation to tweak the law during the most recent council meeting. There is no word yet on whether the tweaks modify the new law to Mr. Davidson's satisfaction.