From Bad To Worse For Bank Of Countrywide Lynch: Utah AG Says BofA's State Foreclosures Are Illegal, As Elijah Cummings Demands BofA Subpoena

Tyler Durden's picture

There were those who were fuming about what a great deal Bank of America got in acquiring Countrywide. Ironically, that same deal threatens to bite the banks in the ass and cost it tens of billions in litigation as more and more realize that the bank's mortgage-related practices (both before the CFC acquisition and after) have been based on a foundation of fraud. While Zero Hedge has not discussed the issue at length recently due to the expected temporary pushback by various legislatures, which would make an outright risk assessment against BofA impossible since there is far more politics than finance involved, it seems that with each passing day things are getting closer to spiralling out of control for America's largest lender. The latest news, just out from Bloomberg, indicating that the bank may be advised to urgently increase its litigation and putback reserve, is that Utah's AG Mark Shurtleff advised Brian Moynhian that the bank's foreclosures in Utah are illegal. "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. “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." Oops. There goes another several billion in litigation fees because that beeping noise is thousands of foreclosed upon mortgageholders calling the first attorney they can find in the yellow pages in hopes (soon to be fulfilled) of unwinding completed foreclosures. This action joins comparable pushes from Connecticut, Illinois and California, and pretty soon BofA will be unable to foreclose upon any home in the domestic US. We estimate that the legal cost associated with foreclosure delays will cost the bank well over a billion when all is said and done. And just to make life truly miserable for BofA, Elijah Cumming sent a letter to the Committee on Oversight and Government Reform advising he is considering a broad subpoena to all mortgage servicers, chief among them, you guessed it: Bank of America.

From Bloomberg:

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. (LPS) 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.

Bank of America's defense: it is exempt from the law.

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.

Elsewhere, below is a copy of the letter sent out by Elijah Cumming to Darrell Issa:

May 24, 2011
The Honorable Darrell E. Issa
Committee on Oversight and Government Reform
U.S. House of Representatives
Washington, DC 20515
Dear Mr. Chairman:
I am writing to request that you issue six subpoenas to mortgage servicing companies that have refused to comply voluntarily with requests for documents relating to illegal foreclosures and inflated fees charged to homeowners—a key area of our Committee's oversight agenda.
Although four other mortgage servicing companies have provided the Committee with at least some information in response to document requests, these six companies have provided no documents despite efforts by staff to obtain their voluntary compliance.
On February 10, 2011, the Committee adopted an oversight plan for this Congress pursuant to House Rule X, Clause 2(d). At my request, the final oversight plan included a commitment to "examine the foreclosure crisis including wrongful foreclosures and other abuses by mortgage servicing companies."1 At the time, you commended my efforts and stated, " I believe we now have a plan that can be unanimously adopted."2
Two weeks later, after consultation with your staff, I sent letters to ten of the nation's largest mortgage servicing companies seeking documents relating to allegations of wrongful foreclosures against military service-members and their families, "robo-signing" of foreclosure documents filed with courts, inflated fees, fraud, and other deceptive practices. These letters requested the following documents for the time period from January 1, 2006, to the present:
(1) internal investigations and audits relating to foreclosure policies, procedures, or practices;
(2) documents relating to improperly executed foreclosures;
(3) documents relating to improper fees charged to homeowners;
(4) the total number of complaints alleging improperly executed foreclosures; and
(5) the total number of complaints alleging improper fees charged to homeowners.

Four of the mortgage servicing companies that received these letters have now begun responding to these requests. We are continuing to work with those companies to gather additional documents and information related to the Committee's investigation.
The remaining six mortgage servicing companies have failed to provide any of the requested documents. Five have written to explain their refusal, and one has failed to respond at all. The companies that have not provided documents are MetLife, Inc.; PHH Mortgage; SunTrust Banks, Inc.; U.S. Bank, N.A.; Wells Fargo & Company; and Bank of America Home Loans.4 Bank of America Home Loans has not submitted any response. One company, MetLife, Inc., explained that it would not provide the requested documents unless it was "subject to a subpoena."5
Our country is facing a foreclosure crisis that has affected six million homes since 2006, and there are currently 2.2 million homes now in foreclosure.6 As we heard during our Committee's first hearing on the foreclosure crisis on January 26, 2011, the performance of mortgage servicing companies has been "abysmal."7 Several of these same mortgage servicers have now admitted publicly that they wrongfully foreclosed on homeowners and charged improper fees.8
To fulfill the Committee's oversight agenda and investigate these allegations adequately, we must obtain responsive documents from these mortgage servicing companies. For these reasons, I request that you authorize and issue subpoenas to compel the production of these documents from MetLife, Inc.; PHH Mortgage; SunTrust Banks, Inc.; U.S. Bancorp; Wells Fargo & Company; and Bank of America Home Loans.
I appreciate your strong interest in these issues and look forward to working with you.
Elijah Cummings

h/t Manal Mehta

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Alex Kintner's picture

Luckily, laws don't apply to Banksters. Whew, that was close.

camaro68ss's picture

I want to be a banker when i grow up

Jeff Lebowski's picture

No worries, Julian Assange is about to drop the hammer on B of A.  Right after the first of the year...  <sarc> 


downwiththebanks's picture

No joke.  CIA limited hangout operation got enough mileage from the press release, I guess.

Problem Is's picture

Maybe Assange wants to be a banksta like Strauss-Kahn when he grows up...


Doyle Hargraves's picture

Well this will be short lived...the bank will find some skeleton in the Shurtleff's closet and poof, they will be legal again ala Spitzer methods...CRIME PAYS BITCHEZ!

Ruffcut's picture

Not if I do it. I know I would be busted, in a heartbeat.

I can't even use the dryer for not removing the lint every time.

How, in a straight face, can you tell your kids to obey the law?

Doyle Hargraves's picture

Sarcasm in that there post. The deal is rigged. The banks will find a way out of that sh*t. Some po-dunk AG from some backwoods state, (I have been to Salt Lake/Provo more times than I care to admit), is gonna hurt the 'biggest lender in the nation', with the law?! The system has become so rigged he will either get skeletons dug up from his past, told to cease and desist by some judge or another politician above him, or will just simply disappear. That is how 'it' works these days. I obey the law, so do my kids, but obviously there are those among us who are above the law now.

Transformer's picture

Well, I humbly, and hopefully, disagree.  I think what we have in Utah is a state government that is responsive to the people of the state.  Utah was the first to make silver and gold legal.   There is something going on there.  The state is pretty much run by LDS constituents (mormons) and whatever else you may say about the religion or its people, they are upright and honest.  I don't think scumbag sociopath politicians have much of a chance in Utah. 


Doyle Hargraves's picture

I hope you are right, too. I mean aside from having to buy alcohol at ABC stores, and the smell of the Great Salt Lake in the morning, it isn't a bad place. But on a national basis, which is where the bank fraudsters operate, it may be difficult for Utah to weather the storm. I mean look at the heat Arizona gets every time they try to fix their problems. Factor in the Feds are actively in collusion with Wells, JPM, BofA, Citi et al., and there will be some challenges to what Utah is trying to do. Believe me I wish the AG all the success in the world, but seeing the system operate doesn't give me any encouragement on the end results...I mean still after all the fraud, graft, corruption, and outright larceny that has occured, there are still no big execs doing the perp walk, nor will there be. Its just business as usual, keep the profits private and socialize the losses through bailouts.  

kumquatsunite's picture

Please, stop the public relations on Utahans (LDS, as transformer calls them) as upright and honest. There has never been a group of crooks more devoted to fleecing their own people, and everyone else, than mormons. Why do mormons lie? Because they are still taking a breath, is the answer. Mormons have long attempted to create a separate country, beginning with their expansive initial land grab, before it was reigned in, when Utah became a state. Utah is the only state in the nation, well maybe Idaho also, that is hostile to other united states citizens based on religion: not a mormon? good luck with that in Utah. Mormons are not in any way upright or honest when you understand that one of the prevailing doctrines of lds doctrine is: "lying for the lord. in other words, it's ok to say anything and everything in order to achieve an extra dollar to "donate/tithe" to the Mormon cult. I, personally, have never met a group more creepy than the Mormons. That whole, baptize the dead thing is very very necromancerish. Then there is the fact that mormon women have the highest prescription drug rate in the entire country (fact). Lastly, I'll break bread with any sociopathic scumbag politician before any mormon. Except of course for Harry Read who redefines the idea of a sociopathic scumbag politician. After all, when you call yourself a mormon but your paycheck comes from women prostituting themselves, suckers losing money at the tables, and people getting drunk, that whole "I'm a holier than thou" mormon thing just doesn't float a boat. Utahans with their endless children, are the biggest users of welfare and scamming school loans: the men go to school and that lets their families scam the welfare system!

LawsofPhysics's picture

don't underestimate the mormons.  They would have no problem inviting those fucking banksters out to Utah for a conference in the mountains to "discuss" the problem before butchering them all and denying that the conference ever took place.  Denying truth is hard-wired in at a very young age.  Beautiful country, Utah.

goldfish1's picture

How, in a straight face, can you tell your kids to obey the law?

Excellent comment.

chunga's picture

Agreed. This is the kind of shit that revs me up like a race-car. Fucking fraud galore. Check out these signatures from Andrew Harmon of Harmon Law P.C. This guy is the David J. Stern of New England.


chunga's picture

Reply to myself. Funny how things work sometimes. I put the above link on Foreclosure Hamlet and surprise, surprise...we have "infrastructure problems". Users can't log in. Not pimping - just saying...

ZH IT dept. must have a blast.

LRC Fan's picture

Meh, markets don't care.  The sheeple are completely tuned out to this kind of stuff.  People should just stop paying their mortgage and crash the system.  But it's up to them, if they want to pay then I wouldn't blame them, but at this point your credit score is becoming more and more meaningless.  It's all paper and credit and derivatives and bullshit.  Soon, and very soon, it will be all about how much physical silver/gold you own.  Not SLV or GLD or registered shares or whatever but the real deal.  Credit will probably be very tight when the shit hits the fan, but those with gold/silver will have no problems getting stuff they need. 

Markets are surging to new highs.  Look for the gap up tomorrow.  Buy any and all dips.

FIAT_FixItAgainTony's picture

agreed lrc.  it was time to turn our backs to the "system" some time ago. 

the sheeple in amerika have no idea how corrupt the "system" has become until you enter the courts.  most get a foreclosure notice and do not fight it because they cannot "afford" an attorney (agent of the system).  so these sheeple never see the reality of how the attorneys and judges are in bed together.

yes, giving them notice you won't be subjected to their self-serving "system" is a start, then you put their feet to the fire and watch what you made ignite burn.  after "noticing" the court and then sending notice to the proper oversight committees, it's amazing how quiet the judge becomes.

the tide has turned and it's better late than never. 

i agree with the statement: TPTB have become TPTW.

iinthesky's picture

About a month back I sent a FDCPA type request to the bottom feeding parasitical leech debt collectors who were trying to collect on an alleged debt of $300 they claim was owed to chase and now to them for fees Chase decided to charge me on a checking account that I disputed. I asked them simply.. please prove that a debt exists with real documentation, not copies of statements which are meaningless, and that I am obliged to pay these monies to the debt collector [which if course they can never prove or show] and I'll take care of it. So what happened? A few days ago I get a letter [Directly from Chase BAR scum legal dept., not the debt collector], that they are closing a credit card account and that I better pay my alleged debt. The strange this is that this credit card account is totally unrelated to the dispute I had with the debt collector. Now, this is obviously in retaliation to having me, one of the slaves, speak up demanding the banks follow the law and prove that these fees constitute debt and that the parasites who purchase the banks bad paper [thereby extinguising the original debt if one existed] prove their claim. This is what they think they can get away with. This is how they respect the rule of law.

Calculated_Risk's picture

Oh yeah... I had a credit card with ZERO balance. Nothing, nada. I asked them to close the account (via letter return receipt requested) because 1. I had never ever used it. 2. I will never ever use it. Six months later, after the market implodes, I get a letter claiming I owe them $32 in late fees. The late fees were because the insituted a rule that members had to pay to have their credit card. The fee $1. Mind you, I never got a letter stating the rule change, a bill for the fee, a bill for the late fees that accrued. They figured I was just some fucking chump that would roll over and pay the extortion (cause included was the threating letter of how my credit score would be horribly disfigured for life!!!).  Luckily for them I had just filed chap. 7, so guess what? I added them to the list of creditors to say FUCK YOU!!!! BAHAHAHAHAHAHA!!!!

P.S. I just watched TBTF last night... they were too kind to hank paulson.. that fuck is as greedy and shit stinking as the rest!!! Try and make that bitch look like he cares for the people or this country! YEAH RIGHT!


Ned Zeppelin's picture

"TBTF" is pure propaganda.  Nothing less than mind control bullshit from these fuckers.  Hank Paulson should be strung up from a lamppost (after a trial and due process, of course.) 

Josh Randall's picture

I say "BY" you say "U".. BY-U, BY-U, BYU....clap, clap, clap!!!

LFMayor's picture

That's awesome... we'll have ourselves another Mormon War!  Get some fire water over to the Utes and have them join the party, too and shit will really start to roll.

ebworthen's picture


"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."

Okay then, B of A can move the houses from Utah to Texas and then sell them - & the foreclosed Utah owners get to keep the lot.  Quick, buy up shares of Union Pacific and drought plagued Texas farmland.


slewie the pi-rat's picture

darrel issa is from--cali!  this well-connected R is from down robotrader'z way and is fondly revered by all as the richest member of congress. 

stay tooned!


LawsofPhysics's picture

This will be the case in many other states that were taken advantage of.  Possession is quickly becoming the law on everything.

Dick Darlington's picture

and equities goes nuts...

Gubbmint Cheese's picture

what in the hell is going on with the market? what's the (fake) reason du jour for the gap up?


Josh Randall's picture

High oil prices are good for the economy don't you know ?

LRC Fan's picture

Yep, on a day like today (Dow ramping up), higher oil prices are "driven by increased demand" while lower oil prices are "good for cash strapped consumers."  Priceless shit.  Then when the market goes down (lol, it does happen from time to time, hear me out here) higher oil prices "crimp demand at the pump" while lower prices "signal a demand slowdown in emerging markets, such as China."  You literally can pay me $1 per article and I can pump out these "market recap" stories all day in about 30 seconds flat.  Bloomberg ain't got shit on me. 

They use the same words and phrases over and over and over and over again.  Just pick out of a hat, and fill in the blank.  Ready?

Markets were _______ (higher, lower) today on ________ (increased, decreased) demand, as well as _________ (housing, unemployment, GDP report) which came in _______ (pick a %) ______ (higher, lower) than Bloomberg consensus of 24 economists.  This report shows that consumers are hard hit and will crimp demand at the pump. 

I especially love the words/phrases "shrugged off," "crimp," "unexpectedly," and my all time favorite, "win" as in "Greece is trying to forge a plan to win more aid from a jittery EU." 

ebworthen's picture

Yes, the emotional euphamisms for HFT machines wired into Elites bank accounts are nauseating.

The markets aren't really markets, they are display cases at Tiffany's and Saks.  Time to smash some windows.

CrankyOldCreditGuy's picture

++ awesome, copyright it and charge your $1 per use

iinthesky's picture

Yeah, whenever something is a miss or so-called bad news.. its always 'unexpected' this or 'unexpectedly' that. It's so shocking and unexpected, how could the market go down? But then they always have the reason pre-packaged and ready to roll off the teleprompter. They are so damned smart!

hidingfromhelis's picture

Mad Libs for a ponzi economy...I like it!

Ned Zeppelin's picture

Don't omit "surge" and "soared today" from your Propaganda Handbook.  


LRC Fan's picture

Someone frontrunning a huge drop in the Dixie.  It sure as hell isn't good economic data, good earnings, or "bargain hunting."  Lookout below in the DXY tonight, as we gap higher tomorrow. 

ebworthen's picture

Banks and Hedgies in collusion with Treasury and the FED are making a lot of money off of volatility.

The TBTF's are in the front of every trade, so anything up or down for any reason gives them a win.

The entire financial system is unhinged from the reality of the majority of individuals.


alien-IQ's picture

Dear Mr. Cummings,

Stay away from:

Private Planes

Good luck.

Boilermaker's picture they blast the shit out of the market.

The REITs just took a ramp job from hell also.

Seriously, who even gives a flying fuck about this shit anymore?  Clearly, they aren't going to ever...yes, ever...stop this shit now.

Unfucking real but, seriously, who gives a shit.  Your rights as a simple non-billionaire are absolutely zero.  This is just a pathetic joke now.

LRC Fan's picture

Cue RoboTrader with endless chart porn. 

mynhair's picture

Very bullish for puta Market.

carbonmutant's picture

 " exempt from the law"

sounds like a license to kill...

boiltherich's picture

This starting to work my last nerve, I mailed my keys back to the bank a year ago and they still have not sold it yet.  I asked and they said that it was going to auction in April, but it was postponed to May 18th, and at that auction it was permanently withdrawn.  In the meanwhile in this state I am still the owner even though I have not made a payment in a year, which makes me liable for HOA fees and dues, insurance, though I can't buy a policy for a house I don't live in, and I cannot begin to repair my credit as long as the "late payments" keep stacking up every month. 

I had gotten a tax credit for First Time Home Buyer back in 2009 and now the IRS is auditing me, asking me to prove the house was really foreclosed upon, when I called Chase they said the foreclosure was cancelled.  WTF?  What do I have to do?  Leave the country?  I needed to move and could not sell, the bank was not going to cooperate with a short sale, I could not rent it out for anything close to the PITI payments, I do not have enough income to use householders tax breaks, I do not even file with the IRS. 

For those who asked, the markets are reacting to the huge drop in durable goods, because they no longer earn money from economic activity but are on the dole so any news that assures them the QE's will keep coming sends all markets higher.  I mean commodities are also higher though industry which uses those is in decline, there was a time when a huge drop in durables would send commodities and equities sharply lower.  Even bond yields are falling, who here would like to take a guess at how much cash it takes to move equities, bonds, and commodities all higher in a single day?  Here is a hint, a one point up move in the Dow requires a net inflow of about 1.5 billion dollars and it is the smallest of the three markets.  76 points up means that about 114 billion have flowed into the NYSE alone today so far. 

Gully Foyle's picture


"which makes me liable for HOA fees and dues"

What the fuck is up with banks being exempt from HOA fees? The buyer becomes liable for those fees which the bank has not paid.

Under any normal legal system once the bank stopped paying the fees no one would be responsible from that point on. Precedent was established.


legal eagle's picture

Here are some interesting facts.

The first to foreclose can chase deficiency for only 6 months because they got the property. Second lender, 6 years

HOAs are now foreclosing on homes, making them the first lender to foreclose - and allowing the first lenders (usually largest loan), and second lenders, six years to chase homeowners for deficiency judgments.

People who are in their homes awaiting foreclosure should pay the HOA fees so this doesnt happen to them.

If HOA fees arent paid, they are the responsibility of the property holder until the foreclosure. 



Transformer's picture

Boil-- your mistake was leaving the house.  Stop paying , but don't move.

iinthesky's picture

I suggest you countersue the bank and ask for the securitization documents. Chase is among the worst of the mega-monsters. You can bet these fucking swine have already been paid on that loan through insurance and securitization most of which is highly questionable if not outright fraud. I suggest you do not hire a real estate attorney unless they are willing to put their BAR cards up and nail these scumbags because most of them will not look after your interests. Go read some actual cases and learn how they operate. They get paid up front more than the entire so-called loan is worth. And yes, fuck it, go live in the house. It's their system, they created it, now they have to suck it. Sad thing is the currect slew of forclosures only scratch the surface because I believe the judges are not ready yet to deal with the ultimate fraud, the fact that the banks loaned you YOUR OWN CREDIT and now they want to forclose on it. Read a most interesting affidavit submitted by an expert witness, and ex federal reserve lawyer, Walker Todd. It is VERY VERY enlightening. Here-- read this: