SEATTLE (Legal Newsline) -- Washington Attorney General Rob McKenna announced Friday that his office is suing ReconTrust Co. for conducting illegal foreclosures on thousands of state homeowners.
"ReconTrust ignored our warnings, repeatedly broke the law and refused to provide information requested during our investigation," McKenna said in a statement.
"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, a subsidiary of Wall Street giant Bank of America, 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 Attorney General's Office explained.
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."
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 said.
The company also is accused of violating Washington's Consumer Protection Act. The state's allegations include:
- Failure to maintain a physical office with telephone service in Washington;
- Failure to identify the actual owner of the promissory notes being foreclosed;
- Providing confusing information regarding how borrowers defaulted and how they can cure that default;
- Failure to conduct foreclosures in a public place, instead holding them at private sites including an office park in Bellevue;
- Creating or permitting the use of documents that were improperly executed, notarized or sworn to; and
- Failure to exercise its duty of good faith toward the borrower by deferring solely to the lender when deciding whether to postpone a foreclosure.
Sugarman said notices and agreements contained conflicting dates and improper notarizations and ReconTrust employees sometimes signed as officers of other entities.
According to the state's complaint, homeowners facing foreclosure are "captive to ReconTrust's services."
The company's failures to abide by the law, the state says, 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.
The state's 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.
The Attorney General's Office estimates that ReconTrust has issued 9,900 foreclosure notices since January 2008 in King, Pierce and Snohomish counties alone.
It's unknown how many of those foreclosures violated homeowner rights, although the Attorney General's Office said it believes the problems are systematic and widespread.
It's also unknown how many foreclosures may have been prevented had ReconTrust complied with laws, McKenna's office said.
Private lawsuits against ReconTrust have been filed in Utah, Nevada, California, Oregon and Arizona for its role in foreclosures in those states, as well as by private attorneys in Washington.
From Legal Newsline: Reach Jessica Karmasek by email at email@example.com.