On May 28, Chad Beyer, a young Moab farmer, finally received some good news. He had qualified for the Home Affordable Modification Program, or HAMP, that would modify his home loan and help him stave off foreclosure. However, he would have to wait up to 45 days for the paperwork to be processed, and Bank of America would be selling his house on the courtroom steps in two weeks in a foreclosure sale. When Beyer asked Bank of America representatives about delaying the foreclosure, he was told they couldn’t help him because Recontrust, a separate, but wholly owned subsidiary of Bank of America, processes foreclosures.
Beyer, like many Utah homeowners facing foreclosure, was already beaten up by a bad economy. Now, he was being bullied through the legal process. Although Beyer tried to explain to Bank of America that it couldn’t foreclose on him if it had already agreed to help him save his home, he was soon facing eviction from his home of 12 years. The 38-year-old, however, would not be intimidated. While he carries the demeanor of a laid-back Moab hippie, Beyer was a corporate paralegal before he started raising sheep and decided to dust off his legal skills to fight to save his home.
“Most people see these complaints and crap their pants,” Beyer says. “I said, ‘No way, I’m fighting this.’ ” Like others in Utah, Beyer is taking a states’-rights approach and arguing that Recontrust has run roughshod over state laws that require anyone doing nonjudicial foreclosures to be either a licensed Utah title company or certified with the state bar, and to have a physical business office in the state.
Beyer’s troubles, like most of the nation’s, began in 2008, when the housing crisis spiked mortgage rates for many homeowners. Beyer had already had a rough winter, and when the housing bubble burst,, his mortgage rates doubled. Beyer quickly applied for the federal HAMP program, which would not only keep a roof over his head but also protect the more than $120,000 worth of equity in his home. Beyer discovered, however, that Bank of America and Recontrust did not seem to be sharing notes with each other on Beyer’s file. On one hand, Bank of America would reassure him that his HAMP paperwork was on its way, while at the same time, Recontrust aggressively pushed foreclosure—despite the fact that HAMP applicants are given a stay on foreclosure, according to program guidelines.
Beyer spent many full days trying to get answers from call-center employees in Costa Rica and India representing both Bank of America’s loan-modification department and Recontrust. His calls for help were shuffled to different departments, put on hold, and often just disconnected.
“I was calling these people 20 to 40 times a day,” Beyer says. “Meanwhile, the time bomb is ticking on my foreclosure sale.” With company help lines offering little assistance, Beyer decided to fight the foreclosure legally.
He’s not the only one. On Oct. 7, Bank of America announced it was halting all its foreclosures in the United States, only a week after it suspended the foreclosures in 23 states because of lawsuits alleging serious paperwork errors that denied homeowners the right to fairly challenge their foreclosure proceedings.
Before this announcement, however, Beyer was facing a lawsuit by the Federal National Mortgage Association (Fannie Mae), that ended up owning his home after the bank failed to sell his home at the June 17 foreclosure sale. On Aug. 30, he received a notice that Fannie Mae was invoking Utah’s landlord-eviction laws and that he had three days to leave the property or be forcibly removed by the authorities. Beyer decided to sue back.
“At first, I was angry and upset. Then, I just started getting mean—like Clint Eastwood—just plumb, mad-dog mean,” Beyer says. Beyer challenged the legality of the foreclosure because it ignored Utah code that requires non-judicial foreclosures to be conducted by Utah businesses who are either bar certified or licensed title companies.
The legal question of whether or not national banks need to abide by state laws was recently raised by St. George attorney John Christian Barlow, who grabbed national headlines on May 22 for convincing 5th District Court Judge James Shumate to issue an injunction that halted all of Bank of America’s foreclosures in Utah. That injunction was removed, however, by an order from U.S. District Court Judge Clark Waddoups less than a month later.
In his June 18 decision, Waddoups took down the injunction, arguing that federal law allows unique exceptions for national banks to sidestep state banking laws if those laws “prevent or significantly interfere with the national bank’s” exercise of it’s powers. But even among Utah’s federal judges that’s not the consensus. A Dec. 12, 2009, decision from U.S. District Court Judge Tena Campbell ruled to the contrary in the case of Jensen vs. Recontrust. Based on a similar case in Arkansas, federal court “does not completely pre-empt state law concerning non-judicial foreclosures,” the ruling states
Barlow, who also assisted Beyer in his initial filings, says the fight is continuing despite Waddoups’ ruling. He and his clients have made another pleading on the issue to Waddoups, who is currently reviewing his previous ruling. For Barlow, the case is one every red-blooded Utahn should worry about.
“Banks are trampling on individual rights,” Barlow says. “Property rights are a fundamental right that everybody has, and for those to be trampled on is a travesty.”
David Anderton, spokesman for the Salt Lake Board of Realtors, is sympathetic to homeowners’ plights, but also thinks the legal argument is a long shot.
“The bottom line is that banks first lent money on the property, then they have first interest priority on the property,” Anderton says. However, he also believes that the banks’ slow response and eagerness to foreclose are only making things worse for the economy.
“The banks don’t want to modify people’s loans. They just want to short sell them and get them off their books,” he says, adding this foreclosure push could flood the market with foreclosed homes that will drag down home prices all around them. Nationwide, Anderton says that roughly 7 million homeowners are behind on their payments, approximately 50,000 of those in Utah.
Beyer is still waiting for a decision on his case from District Judge Gary Kennedy, who is considering the conflicting federal rulings from Waddoups and Campbell, before deciding if he should remand Beyer’s case back to Utah’s 5th District Court or keep it in federal court.
Even if the states’-rights approach does not prevail, Beyer knows he can also call out Recontrust for improper filing of paperwork—the kind of complaint that has helped grind to a halt the bank’s foreclosure machine nationwide. In his case, there was a notice to change the foreclosure sale date that was never served to him. The notice was only filed with a yellow sticky note placed on the sale notice at the courthouse steps—another sign, Beyer says, the bank forecloses by intimidation rather than by legal right.
“These guys just think that if people can’t afford to pay their mortgage there’s no way they can afford an attorney to fight them,” he says.