Bank of America Subsidiary Sued For Illegal Foreclosure

Chances are you haven't heard of a company called ReconTrust. Unless your home happens to be in foreclosure.

ReconTrust is a subsidiary of Bank of America (BOA) and is supposed to be an impartial foreclosure trustee when a mortgage goes into default. But Washington State Attorney General Rob McKenna charges ReconTrust has repeatedly broken the law since the beginning of the foreclosure crisis.

McKenna has sued the BOA subsidiary, claiming it “has failed to comply with the Washington Deed of Trust Act, RCW 61.24, in each and every foreclosure it has conducted since at least June 12, 2008.” The company is also accused of violating the state’s Consumer Protection Act.

Ignored warnings

“ReconTrust ignored our warnings, repeatedly broke the law and refused to provide information requested during our investigation,” McKenna said. “ReconTrust’s illegal practices make it difficult, if not impossible, for borrowers who might have a shot at saving their homes to stop those foreclosures.”

ReconTrust is a foreclosure trustee that is legally required to act as a neutral party on behalf of both the lender and the borrower while conducting foreclosure proceedings in good faith and in accordance with the law.

McKenna discussed the suit at a news conference held in front of a foreclosed Seattle home. Foreclosed homeowners and a number of private attorneys also voiced their concerns.

“My home is being foreclosed on. The situation has caused great pain for my son and myself,” said Myra Cole, a single mother from Spanaway who said she struggled to find employment after a layoff.

Her loan servicer was reviewing her Spanaway, Wash., home for a loan modification when ReconTrust sold the house at foreclosure.

Got the runaround

“I couldn’t understand how this could have happened,” Cole said. “I got the run-around. I just can’t believe that the company that’s supposed to be helping me is foreclosing on me. We are trying to save our homes. We’re doing the steps they tell us. In the end, it’s all for nothing. It’s an injustice.”

Ruby Barrus told a similar story about the home where she and her husband live in Marysville,” Wash. During a time of financial hardship, their loan servicer promised not to foreclose while they worked out a loan modification.

“Our payments were never late,” Barrus said, adding that they only stopped making payments because the bank indicated they needed to default to qualify for the modification. “We just figured they knew what they were doing because they were our servicer. … Months later, we get a letter from ReconTrust saying they’re our foreclosure attorneys. We had never heard of them.”

Both women are in court battles to keep their homes.

No local office

McKenna said an essential requirement of the Deed of Trust statute is that a trustee maintains an office in the state where homeowners can go to ask questions, make last-minute payments and request a foreclosure be postponed for a legitimate reason. But ReconTrust doesn’t have an office in Washington.

“ReconTrust’s claim that the company doesn’t have to follow Washington law and procedures because it is a national bank is wrong,” McKenna added.

McKenna's suit contains a laundry list of allegations against the firm, claiming it failed to identify the actual owner of the promissory notes being foreclosed, provided confusing information regarding how borrowers defaulted and how they can cure that default.

The suit also charges ReconTrust failed to conduct foreclosures in a public place, instead holding them at private sites, including an office park in Bellevue. It says the company created or permitted the use of documents that were improperly executed, notarized or sworn to.

'Failed to exercise its duty'

Finally, the suit charges ReconTrust failed to exercise its duty of good faith toward the borrower by deferring solely to the lender when deciding whether to postpone a foreclosure.

Based on information obtained during its investigation, the Attorney General’s Office estimates that ReconTrust has issued 9,900 foreclosure notices since January 2008 in three Washington counties alone. ReconTrust forecloses across the state. 

It's unknown how many foreclosures may have been prevented had ReconTrust complied with laws, McKenna said.

In May 2010, the Attorney General’s Consumer Protection Division began investigating reports of lenders and trustee services not properly reviewing foreclosure documents or following other legal procedures.

McKenna sent letters in October 2010 and April 2011, outlining concerns and calling on trustees to suspend questionable foreclosures in the state. The office is investigating more than a dozen other trustees for suspected violations.

Meanwhile, private lawsuits against ReconTrust have been filed in Utah, Nevada, California, Oregon and Arizona concerning its role in foreclosures in those states, as well as by private attorneys in Washington.  The Attorney General of Utah sent a public letter to Bank of America threatening suit if ReconTrust continued to violate Utah foreclosure law.