The state of Washington on Friday confronted Bank of America subsidiary ReconTrust Co. for abusing consumers trying desperately to hang on to their homes.
A lawsuit filed in King County Superior Court could be the first of several Attorney General Rob McKenna may bring as a result of an investigation started more than a year ago against foreclosure trustees who are supposed to act as neutral parties, but in fact are the tool of the institutions or individuals who made or purchased mortgages that became delinquent. Or not.
One homeowner who appeared with McKenna was current on payments until advised by the bank to default so she could qualify for a modification.
McKenna estimates ReconTrust has handled at least 10,000 foreclosures since 2008. By latest count, more than 70 ReconTrust homes are listed for sale in Spokane County, where “distressed sales” of foreclosed homes, or short sales by homeowners on the brink, represent more than one-quarter of closed transactions.
So far, he says, ReconTrust’s defense amounts to “you can’t touch us.” Literally true, and the primary reason McKenna is pursuing ReconTrust and as many as a dozen other trustees in violation of a Washington requirement that they have an office with a telephone number in the state. According to the state’s complaint, ReconTrust also does not divulge the holder of the mortgage, or conduct its sales in public. The documentation is rife with robo-signatures and other irregularities.
Bank of America responded to the lawsuit with a statement saying it complies “with applicable state and federal laws,” and notes it has added a customer assistance center that provides face-to-face support for distressed customers. In May, the bank held a three-day outreach clinic to customers with mortgage problems.
But when those efforts fail, ReconTrust is there to put the hammer down. McKenna has asked the court for an injunction to protect the nails, and seeks financial penalties.
Ultimately, the litigation itself will not keep borrowers behind on mortgage payments in their homes. What it can do is restore fair play to foreclosure proceedings so many Washington consumers never thought would be their fate.
Bank of America, meanwhile, remains under siege, bedeviled by its own activities during the great mortgage bubble and those of the 2008 acquisition of Countrywide Financial Corp. Investors are pummeling financial institutions in a credit world unhinged by downgrades.
Too many ReconTrusts have undermined the public’s sense of trust.