“Franz Kafka lives… he works at Bank of America.”
Judge Christopher Klein’s words kick off an incredible ruling in a federal bankruptcy court in California last week, condemning Bank of America for a long nightmare of a foreclosure against a couple named Erik and Renee Sundquist. Klein ordered BofA to pay a whopping $46 million in damages, with the bulk of the money going to consumer attorney organizations and public law schools, in hopes of ensuring these abuses never happen again—or at least making them less likely.
The ruling offers numerous lessons in the aftermath of a foreclosure crisis that destroyed millions of lives. First of all, the judge specifically cited top executives as responsible, not lower-level employees. Second, the sheer size of the fine—for just one foreclosure—is a commentary on the failure of America’s regulatory and law enforcement system to protect homeowners, despite the financial industry’s massive legal exposure.
Here are the horrific facts of the case: the Sundquists purchased a home in Lincoln, California, in 2008, but ran into financial trouble when Erik’s business faltered in the recession. Like so many others, the Sundquists were told by Bank of America’s mortgage servicing unit to deliberately miss three payments to qualify for a loan modification. Despite agonizing over ruining their perfect credit, they did so.
Bank of America promptly lost or deemed inadequate roughly 20 different applications for a loan modification. At the same time, BofA pursued foreclosure, a dubious practice known as “dual-tracking.”
The Sundquists eventually filed bankruptcy in June 2010, triggering an automatic stay, whereby Bank of America couldn’t foreclose until after the case concluded. But BofA sold the house anyway at a trustee sale and ordered eviction. Inspectors contracted by the bank staked out the home, banged on the doors and tailed the family in cars, terrorizing them to keep tabs on the property.
The bank didn’t correct the violation for six months, by which time the Sundquists, spooked by the constant surveillance and belief they would be evicted, moved into a rental property. Bank of America finally rescinded the sale, but that put the Sundquists back on the house’s title, which is to say on the hook for mortgage payments and maintenance fees.
Read the whole etc. And then read Chain of Title if you haven’t already.