ST. GEORGE — Bank of America has halted almost 1,000 pending foreclosure sales in Utah under a preliminary injunction ordered in Utah's 5th District Court.
The case is headed to an emergency hearing Thursday in federal court.
The state court ruling of May 22 came after attorney John Christian Barlow filed a case in behalf of Peni Cox, who had stopped paying the mortgage on her town home in January 2009. She bought the property in 2007, according to court documents. Since then, foreclosures have skyrocketed, and home prices in many areas nationwide have continue to lose value.
Barlow and Cox had foreclosure proceedings stopped just before the property was turned over to the bank, which bought the mortgage when it purchased the Countrywide Home Loan portfolio. Countrywide had purchased it from yet another mortgage lender.
Now, Cox and Barlow allege that the bank and its affiliate, ReconTrust, have no right to pursue foreclosures in Utah because they aren't registered with the Utah Division of Corporations and don't have face-to-face meeting space in Utah.
The attorney said Cox's rights were violated by lenders who clogged the courts to solve problems rather than pursing good-faith efforts with homeowners.
In a news release, Barlow said Bank of America and other big mortgage lenders received federal bailouts and are "kicking people out of their homes without due process under the law of the state of Utah."
However, federally chartered banks aren't required to register with the Utah Division of Corporations, according to a news release from the division. Bank of America and ReconTrust are among many nationally chartered institutions operating here.
Bank of America agrees that it is not required to register with state offices and adds that none of the defendants named in the Cox lawsuit were notified of the motion for preliminary injunction to halt foreclosure proceedings in St. George.
"Bank of America and the other defendants have asked a federal court to dissolve the injunction, modify it so that it applies only to ReconTrust as it is the only party referenced in Mr. Barlow's motion, or delay its effect until such time as the defendants have had an opportunity to defend against it with a properly-noticed motion," bank spokeswoman Jumana Bauwens said.
In addition to the complaints about Bank of America's foreclosure rights in Utah, Barlow argued before the state court that the Cox mortgage note was split from the trust deed when it was sold through Mortgage Electronic Registration Systems Inc., leaving the mortgage unsecured. Therefore, no one has an interest in the mortgage promissory note, he said.
Bank of America has stopped about 700 foreclosures managed by ReconTrust along the Wasatch Front and another 94 in Washington County. The bank has a total of 943 foreclosures pending in the state, according to ReconTrust's website.
e-mail: rpalmer@desnews.com