Bank Challenges New Foreclosure Law

     CLAYTON, Mo. (CN) – A bank claims in court that St. Louis County is trying “to misuse the police power of the State of Missouri” to make it more costly for state-chartered banks to foreclose on real estate.
     In a class action for itself and other state-charted banks, The Business Bank of Saint Louis sued St. Louis County and the Missouri Department of Insurance, Finance, and Professional Registration, in St. Louis County Court.
     The pugnacious complaint begins: “This case is about partisan politics of the Lesser Depression, not sound bank regulation.
     “Five St. Louis County Council members are attempting to misuse the police power of the State of Missouri to launch a new set of regulations for state chartered banks loaning money on real estate.
     “This is contrary to laws enacted by the Missouri General Assembly.
     “The General Assembly has expressly legislated that current laws and regulations and enforcement agencies supervising loans of money by state-chartered banks are adequate.”
     The bank wants the county’s new “foreclosure and mandatory mediation law,” Bill 174, tossed out because it is inconsistent with and more restrictive than state laws.
     The bank claims Bill 174 “bears a price tag of an annual direct cost to lenders of more than $1 million – which will be paid to a private contractor on a no-bid contract-and indirect costs of millions more in compliance.”
     The bank claims: “Bill 174 imposes two penalties or fines on a lender who wishes to foreclose on a loan on real estate.
     “The first penalty is a fine of $100 which must be paid to a mediation coordinator.
     “The fine is due and payable merely because the borrower has defaulted on the loan.
     “No fine is imposed on the borrower for defaulting, but it is the fault of the borrower which gives rise to the condition to payment of the fine. …
     “The second penalty is a fine of $350, due if the borrower demands a moratorium and mediation.”
     The Business Bank claims that lenders have not been told “what conduct justifies such a fine,” and that lenders have no appeals process for it.
     “Why we need this new ordinance now cannot be explained,” the complaint states. “Missouri already has in place more than adequate laws to protect homeowners against overreaching by a lender who is foreclosing on a loan of money on real estate, secured by a deed of trust with a power of sale.”
     The bank claims Bill 174 makes it illegal for lenders to foreclose on properties in St. Louis County, though Missouri law allows lenders to foreclose without any penalties 21 days after publication. The bank says the law has loopholes that would allow delinquent borrowers to live rent-free while abusing the mediation and moratorium periods of the foreclosure process.
     And bank claims state law expressly prohibits this type of law from municipalities.
     “Missouri instead provides that Missouri state-chartered banks, like plaintiff Business Bank, are to be examined and regulated by the Director of Finance, who in his sole discretion is to determine whether the actions of the plaintiff Business Bank are unsafe or unsound and ‘for the purpose of ascertaining whether it has violated any law of this state, and for such other purposes and as to such other matters as the director may prescribe.’ 361.160.2, RSMo.
     “Missouri counties, expressly, may only pass and enforce laws that are ‘consistent’ with state law and regulations governing state chartered banks. 362.109, RSMo. Counties, expressly, may not pass laws ‘more restrictive than state laws and regulations governing [state chartered bank] lending.’ 362.109, RSMo.”
     The class consists of all banks and trust companies chartered and licensed under Chapter 362, RSMo, to make loans of money on real estate. The Business Bank is represented by John Davidson, of St. Louis.

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