David Dayen: How a Cruel Foreclosure Drove a Couple to the Brink of Death


A married couple resorted to self-harm after being physically and psychologically terrorized by Bank of America over their house—until a judge fined the bank $46 million.

“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.

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.

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.

By the time the Sundquists got the keys back to the home in April 2011, they found all furnishings and appliances removed and the trees dead. The homeowner’s association charged them $20,000 for the substandard landscaping. Bank of America refused to take responsibility for the damages; in fact, they were still threatening to foreclose. Interest on the loan accrued at $35,000 a year this whole time, increasing the amount due.

The couple, both world-class athletes (Renee was an Olympic–level ice skater in Italy, Erik an NCAA champion soccer player) were physically and emotionally broken by the ordeal, what Judge Klein termed “a state of battle-fatigued demoralization.” Erik attempted suicide with pills. Renee suffered a stress-related heart attack and was diagnosed with post-traumatic stress disorder. She routinely cut herself with razors as an outlet for her pain. In a journal documenting six years of this nightmare, Renee Sundquist described constant stress. “All I do is cry,” she wrote.

The Sundquists won a case in state court against Bank of America in September 2013, but the violation of the stay, the heart of the wrongful foreclosure claim, had to be decided in federal bankruptcy court. There, the Sundquists found a judge who empathized with the abuse layered upon them.

In a 107-page opinion, Judge Klein found that BofA definitively violated the automatic stay and wrongfully foreclosed on the homeowners. “Throughout, the conduct of Bank of America has been intentional,” Judge Klein wrote.

By law, judges can impose actual and punitive damages in this type of case. Judge Klein ordered $1.074 million to the Sundquists in actual damages, for housing expenses, attorney fees, lost income, damaged property, medical bills, and emotional distress.

For punitive damages, Judge Klein stressed that the award had to be “sufficient to have a deterrent effect on Bank of America,” especially because of the role of top management and corporate culture in the case. The judge cited communications from the office of Bank of America’s CEO, both to the Sundquists and to the Consumer Financial Protection Bureau, the watchdog agency currently under attack by the Trump administration. After the Sundquists petitioned CFPB about the case, Judge Klein wrote that BofA lied to the agency by denying that they ever foreclosed.

“The oppression of the Sundquists cannot be chalked off to rogue employees betraying an upstanding employer,” Judge Klein wrote. “This indicates that the engine is driven by direction from senior management.” He even added that the misconduct of the CEO’s office “strayed across the civil-criminal frontier.”

This unusual candor hints at executive culpability for foreclosure fraud. “The judge signaled something very important here, which every regulator knows,” said Eric Mains, a former FDIC official who left the agency to fight his own foreclosure case. “This kind of corrupt culture can only be maintained with knowing approval from the top executives.”

After a long discussion of how to best punish BofA, Judge Klein decided to award $45 million in punitive damages, but to give them to entities that fight financial abuse, including the National Consumer Law Center, the National Association of Consumer Bankruptcy Attorneys, and five public law schools in the University of California system (UC-Berkeley, Davis, Irvine, Los Angeles, and Hastings Law School). Klein added that the Sundquists would be protected from having to pay their mortgage until BofA pays up the $46 million.

“Certainly this opinion is a shot across the bow for the bank mortgage servicing operations,” said Alan White, a law professor at City University of New York.

In a statement, Bank of America stressed that the Sundquist loan dated back to 2010: “The processes in place at the time were subsequently modified; regrettably our performance in this particular case was unsatisfactory.” The statement from BofA added, “We believe some of the court’s rulings are unprecedented and unsupported, and we plan to appeal.”

But if one bank is ordered to pay $46 million for just one foreclosure, it begs the question of whether the federal government settled on the cheap in its more systemic investigations of America’s largest financial companies after the 2008 crash. “The governmental regulatory system has failed to protect the Sundquists,” Judge Klein wrote, and that goes double for the millions of homeowners who suffered similar fates, yet didn’t contest their cases or find a judge willing to act on their behalf.

The Obama administration responded to the foreclosure crisis by effectively letting banks off the hook with a series of settlements. Government officials have repeatedly touted these actions, even as subsequent scrutiny revealed the headline numbers to be grossly inflated or at least misleading. But if the going rate for mega-bank legal exposure is $46 million per egregious foreclosure, it’s safe to say the feds dropped the ball in a big way. And the judge’s hints of criminal culpability for top executives, not low-level paper-pushers, clarifies the enduring shame of law enforcement for failing to indict a single major executive for financial crisis-related crimes.

“This is not just an indictment of one big bank, but all of them that continue with this kind of illegal conduct with impunity and no measurable governmental oversight to stop them,” Mains said.

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8 Responses

  1. Loved your article – I have not had the stomach to read the transcripts unless required recently. The testimony was heart wrenching and the whole case was a made for tv movie. (see Banking on America – You Tube JD Knight Films) – This is a national problem. As the judge said – most people didn’t contest their cases or find a judge (how about lawyer and client wiling and able to get it to the trier of fact). The truth is many of these clients are spending fortunes for lawyers and agencies that have no intention of getting the case to trial. This is where they have to be taken. This was not an anomaly – I have successfully sued bank of america twice before sundquist and once after – I now have the view the the national problem that you wrote about – and more. Thanks – and lets do a follow up to some of the outrageous acts in this case. I also thought about all the evidence I made sure entered the record and glad I have 15 years of jury and judge trial work. Judge Klein was the trier of fact and it makes that number or should invincible. Too bad the current lawyer and law schools and agencies don’t think it is. Of Course the bank gets off easy – they still haven’t written a check or made anyone whole but their lawyers. It is always best to divert the story – from the real story – this was a 46 million punitive damage award – not 8 not one – the judge undercut the emotional damages; monday morning quarter backed how the case should have been tryed. – the clients and the time be damned. I think I obtained a good judgement and put the evidence on to get to that verdict. Too bad Judge Klein didn’t address the supreme court case re: multiplier and that this was an extraordinary case (as the other 100 I have are) and the multiplier is thrown out. Dennise Henderson dshendersonlaw@yahoo.com

  2. More and more judges must award damages to homeowners because of bank abuse and fraud.

  3. why couldn’t some of that money go to some of us, that suffered the same or maybe even more? Why couldn’t some of that money go to help us Victims, that can’t afford help? Every lawyer I have spoken with, says oh yes. You have a case. And you would win it. But now let’s talk about your 5.000.00 deposit, don’t they understand, I lost it all?
    And I’m willing to give you 75%, but I just need a chance a start, someone please help us!!!

  4. Dr. James Chappell I agree with you. Why should the money go to these law schools? That doesn’t make sense. They are just as corrupt as the banks.

  5. This is good for Bank of America. I got caught in this kind of situation and was forced to sell my house to defend myself from US Bank. They were trying to steal my equity. I ended up losing my life savings and I have not recovered. Maybe this will wake them up!

  6. So what’s the score now, 1 for us and millions and millions of wins for the banks? That seem fair!

  7. exactly Dr. James….. my son blamed me and still blames me for losing our home and chase reneged on 2 loan modifications. destroyed peoples lives and families. I always had the means to pay them a REASONABLE payment but Chase Bank was never reasonable. Scum of the earth. All these executives should take a leap off of their bank skyscrapers in Manhatten. I understand a few have. How can they live with the havoc they caused to so many lives. We have to be living in the end days to witness such horrible crimes that are going unpunished. The bible talks about the end days and the lawlessness. Just look around at everything going on and the selfishness of the congress (republicans and democrats). Their war is only about themselves. There is no justice in the USA anymore and does not look like there will be anytime soon

  8. I was pleasantly reading the win of the Sundquists against BofA until I read that the bulk of their settlement, 46 million, will go to attorneys, law centers and law schools. The Sundquists were damaged. They suffered, so why does the bulk of their settlement NOT go to them?

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