This is an archived article that was published on in 2012, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

Bank of America has agreed to a substantial settlement in a lawsuit by Utah homeowners in which an earlier ruling had raised serious questions about whether a unit of the bank had legally foreclosed on homes in Utah.

But the state of Utah, which intervened in the case and filed its own complaint, has not signed off on the settlement and apparently wants to continue to assert its claim that the bank's ReconTrust Co. unit, based in Texas, illegally carried out foreclosures in this state.

Homeowners Timothy and Jennifer Bell had sued Bank of America arguing that Countrywide Financial, which BofA acquired in 2008, had engaged in predatory lending practices when it provided them a loan to refinance their Holladay home under terms they did not qualify for and could not afford. They asserted that ReconTrust illegally began foreclosure proceedings on their property when they went into default.

Now, BofA has agreed to reduce the original loan of about $3 million by $1.1 million to make the new loan amount equal to the present value of the property, according to a motion and memo filed Monday in their lawsuit in U.S. District Court in Salt Lake City.

The couple's interest rate also was reduced from the original 7.5 percent to a below-market rate of 2.65 percent for 26 years, court documents say.

"My clients chose to settle because they believe the loan modification benefits they received are … fair and just, and they want to move on with their lives," said Abe Bates, the Bells' attorney.

Attorneys for BofA did not return an email seeking comment.

U.S. District Judge Bruce Jenkins still has to approve the settlement before it becomes final.

Under Utah law, only local attorneys or title companies are allowed to foreclose on property in the state. ReconTrust, however, used neither in the Bells' case or hundreds of other foreclosures in the aftermath of the real estate market's free fall that began in late 2007. The company argued in court that it is governed by Texas law given that it carries out the foreclosure operations from its headquarters there.

But Jenkins ruled that national laws require banks to obey state statutes in the places where they operate, not the laws of the state in which they have their main offices.

That ruling was at odds with those of two other federal judges in Utah on questions that probably will be settled by the 10th Circuit Court of Appeals.

The Utah Attorney General's Office did not respond to an email seeking comment on the settlement in the Bell case.

Another case with some of the same issues is set for oral arguments before the 10th Circuit on Jan. 14. The state of Utah has filed a friend-of-the-court brief in that case but has been denied permission to participate in the oral arguments before a panel of judges.

If the panel upholds the lower court ruling in favor of ReconTrust, the Attorney General's Office wrote, "No doubt … ReconTrust will re-enter the state without any accountability to the citizens of the state, and the Utah Attorney General will be powerless to enforce Utah's trustee qualification statute against ReconTrust — or any other national bank in the country for that matter."

Twitter: @TomHarveySltrib