A California judge has fined Bank of America $46 million for its “heartless” and “cruel” treatment of a couple as they struggled to prevent losing their home to foreclosure. Mark Hames mhames@charlotteobserver.com
A California judge has fined Bank of America $46 million for its “heartless” and “cruel” treatment of a couple as they struggled to prevent losing their home to foreclosure. Mark Hames mhames@charlotteobserver.com

Bank Watch

News and notes on Charlotte's banks and the financial industry

Bank Watch

Judge rips Bank of America over customer treatment, alleging Watergate-style coverup

March 31, 2017 6:00 AM

A California judge has fined Bank of America $46 million for its “heartless” and “cruel” treatment of a couple as they struggled to prevent losing their home to foreclosure.

In his decision this month, U.S. Bankruptcy Court Judge Christopher Klein said the Charlotte-based bank pushed Erik and Renee Sundquist to “battle-fatigued demoralization” during the couple’s fight to hang onto their Sacramento-area home.

The size of the fine, Klein said, reflects the bank’s “high degree of reprehensibility” and is meant to be an amount that “won’t be laughed off in the board room.”

The ruling follows an ordeal that began in March 2009, when the Sundquists defaulted on their mortgage as they faced financial difficulties after Erik’s businesses fizzled during the recession. According to court documents, the couple defaulted because Bank of America said it wouldn’t consider modifying the mortgage to more affordable terms until the couple stopped making payments.

What happened next was a multiyear “cat-and-mouse” game, in which Bank of America batted the couple between as many as 20 loan-modification requests they submitted while the bank repeatedly scheduled foreclosures on the home, Klein wrote in his 107-page ruling.

He described as a “nightmare” the couple’s experience, in which one point the Sundquists, fearing eviction, moved themselves and their 10-year-old twins into rental housing. Meanwhile, the bank strung the couple along with modification invitations that “were made with no intention to reach agreement,” the judge wrote.

“There comes a point at which this case is reminiscent of Watergate: the denial and cover-up becomes worse that the crime,” Klein said. “This conduct has been callous; nay, cruel.”

In a statement to the Observer, Bank of America said it plans to appeal the decision, adding it believes some of the court’s rulings are unprecedented and unsupported.

“Regrettably, our performance in this particular case was unsatisfactory,” said Bank of America, which acquired the Sundquists’ mortgage through its 2008 purchase of California-based lender Countrywide.

“The loan in question goes back nearly a decade and the foreclosure at the center of the claims to 2010, at the earliest stages of the economic crisis,” the bank, noting it has helped more than 2 million homeowners avoid foreclosure since the economic downturn.

In his ruling, Klein said the bank’s treatment of the couple “implicates senior executives” and that it “can’t be chalked up to low-level employees.” The judge pointed to “a number of communications to the Sundquists from the office of the Bank of America Chief Executive Officer.”

“It is apparent that the engine of Bank of America’s problem in this case is one of corporate culture,” Klein wrote.

Klein also accused the bank of lying to a federal banking regulator, the Consumer Financial Protection Bureau. Bank of America made “materially false” statements to the CFPB when it claimed that it hadn’t foreclosed on the Sundquists and that the family was not in active litigation with the bank.

The fine includes about $6 million in damages to the Sundquists, whose home was looted during the period it was vacant after the family moved into a rental, according to the order. Klein’s order also includes passages from Renee’s journal, which describes her having suicidal thoughts and her husband’s attempted suicide during the ordeal.

The order also states the amount the family owns on the mortgage as $584,893.

Deon Roberts: 704-358-5248, @DeonERoberts

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