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Judge Jenkins Grants State of Utah’s Request to Intervene in Allred v. ReconTrust

SALT LAKE CITY July 22, 2015 — The Utah Attorney General’s Office argued today before Judge Bruce S. Jenkins in Utah federal court to intervene in Allred v. ReconTrust requesting the State of Utah become a party in the case. Judge Jenkins granted the request. Assistant Attorney General Thom Roberts argued for the State of Utah and Attorney General Sean D. Reyes, to seek a declaration that Utah law controls non-judicial foreclosure of trust deeds in the State of Utah, that does not authorize ReconTrust to act as trustee in a non-judicial foreclosure in the State of Utah, and that federal law does not preempt or override Utah law regarding authority to act as a trustee in a traditional foreclosure of properties in Utah.

“This particular case could have devastating impact on Utah consumers and Utah law as it cuts to the center of enforceability and applicability of state law,” said Attorney General Sean Reyes. “We are seeking to intervene to ensure that Utah consumers are protected and that Utah law is enforced in transactions within the State of Utah in this case and on any appeal to the Tenth Circuit.”

The challenged statute regarding non-judicial foreclosure trustees was upheld against constitutional challenge in Kleinsmith v. Shurtleff. The Court there recognized the very strong and legitimate interests of Utah in defining who may be trustees and in making it easier for Utahns to meet with those specified trustees. Since that time, Congress passed the Dodd-Frank Act, recognizing that the states have a strong interest in enforcing their consumer protection laws in connection with mortgages and other financial laws. Congress thus in that section specifically limited the normal federal preemption of state consumer protection laws as they might apply to mortgages and national banks, recognizing that state law should not be preempted but rather should be applicable to protect individuals dealing with the banks and trustees.

There have been a number of cases involving ReconTrust and its authority to act as a trustee in a non-judicial foreclosure sale in Utah.  Those cases have been in Utah federal district court, the Utah State Court system, and in the Tenth Circuit Court of Appeals.  The case that went to the Utah Supreme Court, Federal National Mortgage Assoc. v. Sundquist, held that federal law not trump or preempt Utah law and that ReconTrust had to comply with Utah law in connection with non-judicial foreclosures. The United States Supreme Court denied review of that case.

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