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
eliberately 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of America finally rescinded the sale, but that put the Sundquists back on the house's title, which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
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.
