SEATTLE _ Washington state has taken on a subsidiary of Bank of America Corp., charging it with illegally foreclosing on thousands of homeowners in the past three years.|By Christine Harvey, The Seattle Times
SEATTLE _ Washington state has taken on a subsidiary of Bank of America Corp., charging it with illegally foreclosing on thousands of homeowners in the past three years.
The state alleges in the lawsuit, filed Thursday in King County Superior Court, that the bank’s ReconTrust Co. unit failed to act as a neutral third party in every foreclosure it has conducted since at least June 2008. The state estimates ReconTrust has handled 10,000 foreclosures in King, Snohomish and Pierce counties since then.
The complaint also outlined that ReconTrust concealed or misrepresented the actual owner of the debt when conducting foreclosures.
“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,” Attorney General Rob McKenna said in a statement.
McKenna said ReconTrust ignored warnings and refused to provide information requests during the investigation, which started more than a year ago.
Jumana Bauwens, a spokeswoman for Bank of America, said ReconTrust operates in compliance with applicable state and federal laws.
“We disagree with the Attorney General’s concerns on this issue and will vigorously defend the services of ReconTrust against this challenge,” she said.
The lack of regulation over foreclosure trustees was most likely the cause of this issue, said Melissa Huelsman, attorney practicing predatory lending and mortgage fraud laws.
In Washington, lenders are not required to go to court to foreclose when a borrower defaults on a mortgage. Instead, foreclosure trustees _ attorneys, title companies or corporations with an office in Washington state _ act on behalf of the lender to sell the property and repay what the borrower owes.
Since July 26, 2009, state law also has required trustees to identify the owner of the loan, the loan servicer and to provide an address and phone number for that servicer.
The complaint alleges that ReconTrust failed to act in good faith and accordance with these laws. McKenna also said the company didn’t maintain an office in Washington, which is also required by law. The state is seeking restitution for owners who lost their properties and is asking for penalties of $2,000 per violation.
Deb Bortner, consumer services division director for the Washington Department of Financial Institutions, said there has been a lot of confusion in the past three years, especially by those looking to negotiate a loan modification.
“People don’t know where to go or what to do,” she said, noting that loans are often sold to unknown third parties. “How do you negotiate with someone when you don’t know who they are?”
One of those homeowners is Ruby Barrus, a Marysville, Wash., resident. Barrus said she obtained a mortgage in 2007 with a loan serviced by Bank of America’s subsidiary BAC Home Loan Servicing. When she began experiencing financial troubles, she said BAC promised her they wouldn’t foreclose on her property while they worked out a loan modification. She then began making trial payments but still received a foreclosure notice from ReconTrust.
“I had never heard of them,” she said, adding that she experienced many sleepless nights because of the stress and confusion.
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