A federal judge in Sacramento, California has given Bank of America a lesson in corporate responsibility. Bankruptcy Judge Christopher Klein sanctioned America's "Too Big to Care" banking giant up to $46 million for causing severe emotional distress to a California couple facing foreclosure. In the judge's own words, the bank's egregious conduct caused the couple to become victims of battle fatigued demoralization.
Judge's Klein's 109 page opinion should offer hope to millions of home owners who are still fighting pitched battles to keep their families intact and remain in their homes.
According to Judge Klein,
"The mirage of promised mortgage modification lured the [homeowners] into a kafkaesque nightmare of stay violating foreclosures and unlawful detainer, tardy foreclosure rescission kept secret for months, home looted while the [owners] were dispossessed, emotional distress, lost income, apparent heart attack, suicide attempt, and post traumatic stress disorder..."
Bank of America for its part disclaimed all responsibility.
2008, the Saga Begins
The homeowner heroes in this case are Eric and Renee Sundquist. Their saga begins in 2008, the year our economy imploded. [While we squarely blame the mortgage meltdown on big banks such as Bank of America, the banks had an opportunity to make things right. After the TARP bail out which gave hundreds of billions of dollars of taxpayer money to big banks, Congress and the Treasury Department had just one teenie request of banks; help struggling homeowners modify their mortgages. Give them some breathing room if they were otherwise qualified. If you think Bank of America gets passing grades for how they administered the HAMP modification program, read on. We think the banks miserably failed in that task as well.]
After the economy faltered in 2008, the Sundquists bought a much smaller home in California. The owner of their new mortgage? Countrywide Home Loans. (Countrywide was later acquired by Bank of America.)
At the closing, the Sundquists were leery of their new monthly payment but the loan officer promised they could seek an immediate modification. Sound familiar?
No Modification Unless You Skip a Payment
The Sundquists were current on their mortgage payments and had an 800 credit score but were told by Bank of America that they couldn't consider a loan modification unless they missed a payment. Reluctantly, they listened.
Renee Sundquist wrote in her journal, "I called and was finally able to have them [Bank of America] send me a [loan modification] packet if I promised to not make a payment...The struggle to make the decision to agree to not make payments was excruciating. We are not people who walk away from debt.."
That was almost a decade ago. That decision would start a nightmare that still goes on today.
Dual Tracking, "Lost Paperwork"
According to the court, the missed payment started a multi-year cat and mouse game of dual tracking. Banks are not allowed to pursue both foreclosure and modification at the same time but we here stories like the Sundquists daily.
On twenty different occasions, the Sundquists submitted loan modification requests only to have the bank say they were incomplete or not received. While the bank was claiming the loan modification requests were lost or "stale," others in the bank were repeatedly scheduling foreclosure sales.
The emotional distress and pressure was mounting.
Renee wrote again in her journal,
"Called to ask for the modification for the fourth time; now we are two months behind. Finally received the modification packet one and a half months after requesting it... A week passed since sending the modification documents. I called the bank to see if they received them. They said they didn't receive the documents but I was looking at the signature page from the bank when they received them."
Later she would write, "In May still have not been advised as to the status of the modification. When I call the bank now they just hang up on me."
She would then write, "Early August 2009 the bank does not have our modification after all this time. Another call to them and they now admit we are too past due we are not eligible for a modification. September 2009 the bank tells us the modification is under review."
Loan Modifications Not Real
In the end, one honest bank employee admitted the modifications were "not real." They were simply a way for the bank to make more money from struggling homeowners.
With nowhere else to go, the Sundquists filed for bankruptcy protection in 2010.
Bank Violates Bankruptcy Stay
Under federal law, the filing of a bankruptcy stops all collections actions against the debtor. This includes foreclosures. The law has an automatic stay. Creditors must seek permission from the court to foreclose or pursue collections.
Bank of America admits that it received notice of the bankruptcy filing and even followed procedure and transferred the loan to the bank's bankruptcy team. One would think that the bankruptcy team would understand the automatic stay.
Despite having notice of the bankruptcy filing, the bank did not stop the foreclosure sale. The Sundquists home was "purchased" by the bank in June of 2010.
Illegal Foreclosure and Eviction
Even after it knew that the foreclosure sale was improper, the bank "bulled" forward.
The bank started eviction proceedings to toss the Sundquist family from their home. The bank's foreclosure arm then began knocking on the windows and ringing doorbells. According to Judge Klein's opinion, the family was terrorized. Their 10 year old began screaming when a man began banging on a glass door demanding entry.
The Sundquists were served with a three day notice ordering them to leave the property. Even after their bankruptcy lawyer told the bank that it had violated the bankruptcy's automatic stay, the bank did nothing to dismiss the eviction action or rescind the three day notice.
While all of this was happening, the modification folks at Bank of America were continuing to dangle the prospect of a successful mortgage modification. The human tragedy continued.
The Sundquists fled their home with little notice and found a rental. Thinking that they had lost their home, the Sundquists dismissed their bankruptcy petition and tried to pick up the pieces of their shattered lives.
What no one told them is that Bank of America rescinded the sale and secretly restored title in their name. The Sundquists were not notified, however.
Even though they restored title to the Sundquists, another arm of the bank went to the home and began removing personal property and capping water and electric lines.
Months later, the bank gave the Sundquists back their keys and demanded that the couple pay 6 months of mortgage expenses and maintenance fees even though during that six months the bank had looted the property.
The Lender Liability Lawsuit Begins
Finally in 2011, the Sundquists sued Bank of America. That suit was filed in California Superior Court. The bank was able to get the case tossed on technicalities. While that dismissal was being appealed, the bank began threatening foreclosure again. The homeowners association was now threatening the couple as well because while the bank occupied the property, the landscaping wasn't maintained causing the property to become an eyesore.
An internal bank document obtained during discovery revealed that the entire modification process was a charade. That is Judge Klein's words, although we think his words are much too kind.
The bank never had any intention of modifying the loan. It just kept giving false hopes to a couple desperate to keep their home and protect their family.
While the turmoil was continuing, Renee Sundquist's mother passed away. Her journal entry at the time of her mother's death is particularly telling,
"Not even a day has passed since my Mom died, and more stupid letters from the bank. I ripped up the asinine letter up in so many pieces... Some [Bank of America] CEO, managers and representatives are going home tonight, overlooking their dishonesty when they look in the mirror... The dishonesty makes me crazy, but I WIN, because I don't lie like the bank of holy hell..."
Immediately after promising to pay for the lost property, the bank's CEO rescinded that apparent offer to pay for personal items taken from the home.
The Tide Turns
A California appeals court reinstated the Sundquists lawsuit and the couple filed a second action in federal court for the violation of the bankruptcy automatic stay.
While the litigation was pending, the bank was called to answer for its actions by the Consumer Financial Protection Bureau. Judge Klein found that noteworthy because the bank had the gall to lie to the CFPB and deny that they had foreclosed on the couple. The bank also denied that they had been sued by the couple.
Although the Sundquists are finally receiving some well deserved justice, the ordeal has taken a terrible toll. Many precious household goods and memories are gone forever. Eric Sundquist attempted suicide which he says is directly related to the stress caused by Bank of America. Renee went from being a member of the Italian Olympic skating team to now suffering from PTSD and near constant migraines.
Bank Fraud Was Intentional
Judge Klein took the bold step and found the bank's misconduct was intentional. Everyone makes mistakes but Bank of America took their inhumanity to a whole new level.
The court found that Bank of America showed a “callous and reckless” disregard for the law. Judge Klein echoed our concerns of many years; the banks failures stem from a corrupt corporate culture. In Judge Klein's words, the harm suffered by the Sundquists was not that of “rogue employees betraying an upstanding employer.”
Calling the bank's behavior reprehensible, the bank was sanctioned up to $45 million. “[It’s] an amount sufficient to have a deterrent effect on Bank of America and is not to be laughed off in the boardroom as petty cash or ‘chump change,’” Klein said.
And what is the bank's response? Even after being sanctioned by a federal judge, America's "too big to fail" claims it is innocent and vows an appeal.
Will this ordeal ever end for the Sundquists? Yes. The bank can file appeals and then appeal the appeals but justice will prevail. We applaud Renee Sundquist's honesty and the strength of the entire Sundquist family. Hopefully this story will encourage others to come forward.
Hope for Borrowers
Even though we rarely take individual cases against banks, stories like these must be told. So many of lender liability lawsuits that are successful are sealed or subject to confidentiality orders. Banks don't want the public to know when they are forced to pay up. That is what makes this story so wonderful. Because it wasn't settled, the bank can't hide the truth.
If you do nothing else, forward a link to this story to everyone you know who is facing foreclosure or fought a pitched battle with the bank. Many homeowners think the banks always win, That isn't true. There is hope.
Finding a Lawyer that Will Sue a Bank
Lawyers that sue banks? They are few and far between. We get emails everyday from people asking, "Can I sue my bank"? Unfortunately, most lender liability lawyers defend banks. Not us. We are proud to say that the lawyers at Mahany Law and Judge, Lang & Katers only sue banks, we never defend them.
Although we mostly defend commercial borrowers, stories like the Sundquists are important to share. We all love to see the underdog win. In this case it was a bankruptcy judge that finally had enough.
Keep a Journal and Send All Correspondence Certified
Helping the case was Renee Sundquist's journal. Borrowers often tell us that they sent in their HAMP papers "dozens" of times but without certified mailing receipts or a journal, that becomes impossible to prove. (One bank employee told us that they kept a giant shredder in the mail center where HAMP modifications were processed. If you want to know why the bank says they can't find your paperwork, now you know.)
We rarely take individual cases, we will consider them in exceptional circumstances, however. Please, do not call. We receive dozens of calls per day from people facing foreclosure. If you want us to consider your case, understand that we only consider wrongful foreclosure lawsuits and do not engage in foreclosure defense. The only way for us to consider your case is to write to us at [hidden email]. Our apologies if we cannot respond to every email or respond to off topic requests.
MahanyLaw and Judge, Lang & Katers - Lawyers that Sue Banks!