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Utah's attorney general's office said ReconTrust Co., a subsidiary of Bank of America Corp. (BofA), has violated the state's law on foreclosures.
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According to Utah Attorney General Mark Shurtleff, under Utah law, trustees who sell foreclosed properties must be either attorneys who are members of the Utah State Bar or title insurance companies. However, ReconTrust is neither and hence is unqualified to carry out trustee foreclosures.
The attorney general's office said ReconTrust initiates around 4,000 home foreclosures in Utah each year "in violation of Utah law."
The filing was made in the U.S. Court of Appeals in Denver in a homeowner's lawsuit against ReconTrust and BofA.
This is not the first time ReconTrust has run into legal trouble. Last year, a Utah state judge issued an injunction barring ReconTrust from conducting trustee foreclosure sales in the state. A federal judge later lifted the injunction.
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ReconTrust was also stopped in Nevada, by a state judge, from conducting non-judicial foreclosures of those that don't require court supervision. A federal judge in Nevada later set aside the state court order, allowing foreclosures to proceed.
In the present lawsuit, BofA has argued that it has the authority to conduct foreclosures in Utah under the federal National Bank Act. No other state laws limiting or establishing preconditions are applicable to national banks, it said.
Under that law, only statutes of the state where the bank is located can be applied to fiduciary activities, the bank said in its court filings.
The bank has also said that ReconTrust's trust operations for Utah foreclosures take place in Texas though it is based in California.
The case is Cox v. ReconTrust Co., 10-04117, U.S. Court of Appeals for the 10th Circuit (Denver).
