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Bank of America stopped filing foreclosure default notices in Salt Lake County earlier this month, but its attorney argued in court Thursday that it still has the legal right to do so.

The seeming contradiction wasn't explained by the bank, though the halt in filing of notices of default in county property records apparently comes ahead of a pending agreement with the Utah Attorney General's Office to end the practice state attorneys consider illegal.

Gary Ott, the Salt Lake County recorder whose office keeps official property records, confirmed Thursday that ReconTrust, the foreclosure arm of Bank of America, has not filed a default notice since earlier this month. That appears to mean the banking giant stopped the procedure after a letter from the A.G.'s Office saying that ReconTrust does not qualify to carry out foreclosures under Utah law.

North Carolina-based Bank of America did not return several emails seeking an explanation. Its attorney, William Boland, also declined to comment after a Thursday court hearing in Salt Lake City.

But in the hearing in federal court Boland said that a proposed class action lawsuit against ReconTrust and Bank of America should be dismissed because federal bank laws preempts a Utah law that says only Utah attorneys and title companies can carry out foreclosure filings and sales.

"Those laws allow ReconTrust to exercise the powers of foreclosure," he told U.S. District Judge Dee Benson.

Salt Lake City attorney Craig Smay, who filed the lawsuit, tried to counter Boland's argument that because ReconTrust is competing with title companies for business federal law allows it to carry out foreclosures just like the title companies do.

Responding to a series of questions by Benson, Smay said ReconTrust is not a competitor to Utah title companies.

"There is no competition between ReconTrust and Utah title companies," said Smay, pointing out the Texas company is not licensed to do business as a title company in this state.

Another homeowner attorney, Christian Barlow of St. George, asked why ReconTrust had halted filing foreclosures under its name if it believes the practice is legal.

"If ReconTrust can foreclose, why did they stop?" he asked.

Benson said he would rule soon on the issues.

Some 15 homeowners showed up for a demonstration ahead of the hearing to try to push Utah federal courts to do something about what they characterized as a foreclosure mess in Utah. Federal judges here have overwhelmingly sided with loan servicers such as Bank of America in homeowner lawsuits.

Melanie Thomas said she organized the demonstration out of frustration with trying to get a loan modified on her own house, where the family cares for a severely disabled child. She characterized her dealings with Bank of America as "a joke, a total joke."

"You never get straight answers," she said.

Another homeowner, Karolyn Michelsen, of Draper, also said she was frustrated trying to deal with a loan servicer on her house after it fell into foreclosure. She said the loan servicer even refused an offer to sell the house at full price.

"I offered them a very fair solution," Michelsen said.

The office of Attorney General Mark Shurtleff earlier this year sent Bank of America a cease-and-desist letter. On Wednesday, Paul Murphy, a spokesman for the attorney general, said the office and the bank were close to an agreement that would require ReconTrust to stop carrying out foreclosures.

ReconTrust's apparent voluntary halt to the practice does not mean that it cannot go ahead with new foreclosures if Bank of America or another entity appoints someone who qualifies under Utah law to carry out the process.

But Merrill Chandler, executive director of the National Association of Foreclosure Defense Advocates, a group based in Salt Lake City that he started with Smay, said the action is an admission that ReconTrust had carried out thousands of illegal foreclosures and could be liable for damages.

"We believe there are over 15,000 people in the state of Utah who have received these notices since 2005," said Chandler.

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