State Accuses Bank of America Unit of Thousands of Illegal Foreclosures

By Vanessa Ho, Seattle Post-Intelligencer

08 August 11

State Attorney General Rob McKenna has accused a Bank of America unit of conducting thousands of illegal foreclosures in Washington, in which he said the company had confused homeowners, made it nearly impossible to save their homes, and failed to act as a neutral third party.

McKenna sued ReconTrust, a California-based foreclosure trustee, in King County Superior Court Thursday.

The lawsuit alleges that the Bank of America subsidiary has violated state laws in "each and every foreclosure" in Washington. Since 2008, ReconTrust, which forecloses statewide, has done 9,900 foreclosures in King, Pierce and Snohomish counties alone.

"ReconTrust ignored our warnings, repeatedly broke the law and refused to provide information requested during our investigation," McKenna said in a statement Friday.

"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."

At a news conference held by McKenna, two women said ReconTrust had improperly foreclosed on their homes. Myra Cola, a single mother from Spanaway who was laid off, said her loan servicer was reviewing her home for a loan modification, when ReconTrust sold it at foreclosure.

"I couldn't understand how this could have happened," Cole said in a statement released by the Attorney General's office.

"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."

McKenna said ReconTrust violated the state's Deed of Trust law, which requires that a foreclosure trustee maintain an office in Washington. That's to help homeowners ask questions, make last-minute payments and request a foreclosure postponement.

"ReconTrust's claim that the company doesn't have to follow Washington law and procedures because it is a national bank is wrong," McKenna said.

A spokesperson for Bank of America, based in Charlotte, North Carolina, did not immediately return a call for comment to Bloomberg.

The complaint against ReconTrust stems from a larger investigation into foreclosure mishandlings that McKenna and other state attorneys general began last year.

Washington is a so-called nonjudicial foreclosure state, in which courts don't review foreclosures. Instead banks hire trustees, who are supposed to act as neutral third parties, to handle home seizures.

In addition to failing to keep am office in Washington, McKenna also accused ReconTrust of:

• Failing to identify the actual owner of a promissory note being foreclosed.
  
  
• Giving confusing information on how borrowers defaulted and how to fix a default.
  
  
• Holding foreclosues in private, like an Bellevue office park, instead of in a legally required public place.
  
  
• Allowing documents to be improperly signed and notarized.
  
  
• Failing to act in good faith toward a borrower.

McKenna is seeking a fine of up to $2,000 per violation.