Bank of America Corp. (BAC)’s ReconTrust unit failed to conduct foreclosures as a neutral third party as required by law, Washington state Attorney General Rob McKenna said in a lawsuit.
ReconTrust, which acted as a trustee handling foreclosures, had a duty to act in good faith to borrowers as well as lenders, McKenna said today at a press conference announcing the suit. ReconTrust also concealed or misrepresented the actual owner of the debt when handling foreclosures, according to the complaint filed in state court in Seattle.
The lawsuit follows an investigation of Washington trustees’ foreclosure practices, including faulty documentation. McKenna said the lawsuit was filed because ReconTrust didn’t take corrective actions to change its ways.
“They have left us with no choice,” McKenna said. “We will have the full attention of ReconTrust and its owner, Bank of America, and they will be more interested in sitting down and making things right.”
Lawrence Grayson, a spokesman for Charlotte, North Carolina-based Bank of America, didn’t immediately return a call for comment on the lawsuit.
Nonjudicial Foreclosures
Washington is a so-called nonjudicial foreclosure state, where courts don’t review documents and banks hire trustees to handle home seizures.ReconTrust processed deeds that contained “material misrepresentations,” the attorney general said in the lawsuit. The company also didn’t maintain an office in Washington, as required by state law, McKenna said.
Washington law requires trustees to act in good faith for all parties, McKenna said.
“ReconTrust looks to the bank for direction and orders about what it’s supposed to do,” McKenna said.
The state is seeking civil penalties of $2,000 a violation and the complaint alleges thousands of violations, McKenna said. The lawsuit also is seeking restitution for homeowners who unfairly lost their properties.
The case is Washington v. ReconTrust Co., 11-26867-5, Superior Court, King County, Washington (Seattle).
To contact the reporters on this story: Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net; Brad Broberg in Seattle at bradbroberg@comcast.net.
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net
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