Drivers and residents along 25th SW in North Delridge were doing a bit of a head-swivel this past hour, as a knot of camera- and microphone-wielding media clustered around a group of people including state Attorney General (and Republican candidate for governor) Rob McKenna. He was here to announce a lawsuit (see it here) against ReconTrust, a branch of Bank of America, for allegedly violating state law regarding foreclosures. The bungalow that served as a backdrop was chosen because its foreclosure involved ReconTrust; it’s now owned by Fannie Mae and up for sale, and the couple who used to own it – who fell on tough times when the husband was diagnosed with cancer – lives nearby.
(They were unable to attend the media briefing, but two homeowners from other areas of Puget Sound were brought in to tell their stories.) Here’s McKenna explaining what the suit is about:
As he explained, ReconTrust is a foreclosure trustee. In our state, foreclosures do not involve judges – they are non-judicial, and trustees are involved, though they are supposed to act, as the Attorney General’s news release says, “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 expressed hope that this would be resolved quickly, as he believes bringing suit will “get (the company and its parent corporation)’s attention.” If you are facing foreclosure, the Attorney General’s Office has resource information here. Their news release (we’ll add it here when we get it as a linkable doc) also points out that Recon Trust’s site for which properties it’s selling locally – go here.
ADDED 12:10 PM: The official news release is now out:
Washington Attorney General Rob McKenna today announced that his office is suing ReconTrust Company, a subsidiary of Bank of America, for conducting illegal foreclosures on thousands of Washington homeowners.
“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.
The lawsuit filed in King County Superior Court by McKenna and Assistant Attorney General Jim Sugarman, of the office’s Consumer Protection Division, alleges that “ReconTrust 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.
The Attorney General’s Office announced the suit during a news conference held outside a foreclosed home in Seattle. McKenna and Sugarman were joined by two women whose homes were foreclosed by ReconTrust and several private attorneys who are also concerned about ReconTrust’s actions.
“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 struggled to find employment after a layoff. Her loan servicer was reviewing her Spanaway home for a loan modification when ReconTrust sold the house at foreclosure.
“I couldn’t understand how this could have happened,” Cole continued. “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. 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.
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.
The Attorney General’s Office alleges the company:
· Failed to maintain a physical office with telephone service in Washington.
· 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.
· Failed to conduct foreclosures in a public place, instead holding them at private sites including an office park in Bellevue.
· Created or permitted the use of documents that were improperly executed, notarized or sworn to. Sugarman said notices and agreements contained conflicting dates and improper notarizations and ReconTrust employees sometimes signed as officers of other entities.
· Failed to exercise its duty of good faith toward the borrower by deferring solely to the lender when deciding whether to postpone a foreclosure.
The complaint states that homeowners facing foreclosure are “captive to ReconTrust’s services” and that the company’s failures to abide by the law have concealed material information needed by homeowners to assert rights and defenses, negotiate a loan modification, cure defaults, and postpone or stop a foreclosure sale.
Sugarman said, “It is particularly important right now for trustees to understand and strictly comply with Washington foreclosure law. There have been several changes including a new right for homeowners to request mediation to discuss a possible loan modification or forbearance before the bank pursues foreclosure.”
The complaint asks that the court require ReconTrust to comply with the law and impose civil penalties of up to $2,000 per violation, as well as restitution for consumers.
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 King, Pierce and Snohomish counties alone. ReconTrust forecloses across the state. It’s unknown how many of those foreclosures violated homeowner rights, although the Attorney General’s Office believes the problems are systematic and widespread. It’s also unknown how many foreclosures may have been prevented had ReconTrust complied with laws.
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.
The office also remains very involved with the multistate investigation into problems in the foreclosure industry.