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BofA Unit’s Utah Foreclosures Illegal, State Says in Letter

Bank of America CEO Brian T. Moynihan
Brian T. Moynihan, chief executive officer of Bank of America Corp. Photographer: Brendan Hoffman/Bloomberg

A Bank of America Corp. unit conducting home foreclosures in Utah is violating the law, the attorney general said in a letter as individual states advanced their investigations of mortgage servicing.

ReconTrust Co. isn’t meeting requirements for carrying out foreclosures in the state, Utah Attorney General Mark Shurtleff said in a letter to Bank of America Chief Executive Officer Brian Moynihan. The letter, dated May 19, was released today by Shurtleff’s office.

“All real estate foreclosures conducted by ReconTrust in the state of Utah are not in compliance with Utah’s statutes, and are hence illegal,” Shurtleff wrote.

Jumana Bauwens, a spokeswoman for Charlotte, North Carolina-based Bank of America, didn’t immediately return a phone message and an e-mail seeking comment.

The move to crack down on ReconTrust comes as federal officials and attorneys general in all 50 states are scrutinizing how the largest mortgage servicers, including Bank of America, handle home loans and conduct foreclosures. New York Attorney General Eric Schneiderman is investigating banks’ mortgage securitizations, and California Attorney General Kamala Harris has announced a mortgage fraud task force.

Lender Processing Services Inc. was subpoenaed by California and Illinois as part of an investigation of mortgage-servicing practices, according to statements today. Illinois also subpoenaed Nationwide Title Clearing Inc., according to an e-mailed statement from the office of Attorney General Lisa Madigan.

Connecticut Letter

Connecticut Attorney General George Jepsen said Bank of America, the biggest U.S. bank by assets, “is failing to devote adequate resources” to its mortgage-servicing business in the state, according to a May 20 letter released by his office today. Mortgage borrowers seeking help are experiencing “significant difficulties” with the bank, according to the letter. Jepsen is helping to lead settlement negotiations with mortgage servicers as part of the 50-state investigation.

“Despite having had more than two years to ‘right-size’ your staff and establish effective procedures and systems, Bank of America has so far not prevented even the most common consumer complaints,” Jepsen wrote to Moynihan.

Earlier this year, in a homeowner’s lawsuit against ReconTrust, Shurtleff’s office told a federal appeals court that ReconTrust was breaking the law and urged the court to rule that it isn’t qualified to conduct trustee foreclosures in Utah.

Utah Appeal

In the appeals court case, Bank of America argued that ReconTrust has the authority to conduct foreclosures in Utah under the federal National Bank Act. The only laws that can limit the fiduciary activities of the company are the laws of the state where ReconTrust is located, it said. ReconTrust is based in California and its trust operations for Utah foreclosures take place in Texas, according to the court filing.

The Utah attorney general’s office “adamantly disagrees” with the position that as a national bank ReconTrust is exempt from following Utah law, Shurtleff said. ReconTrust must be a member of the state bar or a title insurance company, according to the attorney general.

Shurtleff told Moynihan that his office intends to enforce that law and asked for a response within 30 days.

“ReconTrust’s exercise of fiduciary powers in the state of Utah is a violation not only of state law, but also applicable federal law,” Shurtleff said.

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