The story you are about to read is true. I originally posted this tale on our sister blog, Banking Misconduct. After hearing from several bank employees, I decided to repurpose the story and share with would be whistleblowers. It details just how bad things can get when big banks set up their employees (and customers) for failure.
We hope this post will get bank and loan servicer employees to step forward and become whistleblowers. More on that after the story.
Earlier this week, a federal bankruptcy judge in Sacramento, California sanctioned Bank of America for intentional violations of the automatic stay in bankruptcy. Few bankers are probably shocked at that revelation but wait to you read what Bank of America did and the judge’s response.
U.S. Bankruptcy Court Judge Christopher Klein sanctioned Bank of America up to $46 million for causing severe emotional distress to a California couple facing foreclosure. The court says the bank’s egregious and intentional misconduct caused the couple to become victims of “battle fatigued demoralization.”
Unfortunately, we know of many bank workers who suffer from battle fatigue and demoralization as well.
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…”
The bank’s response? Despite a 109 page opinion filled with findings of misconduct, the bank says it did no wrong and plans to appeal.
Meet Eric and Renee Sundquist
This tale begins in 2008 when America’s financial system was on the brink of collapse. Realizing that money was tight, the Sundquists decided to downsize and move their family into a smaller home. Back in 2008, the Sundquists had a great 800+ credit score, a young family and a beautiful home. Both Renee and Eric were accomplished athletes and both in great health. Renee was a skater on the Italian Olympic team.
Renee Sundquist kept a journal. Back then her journal was to remember happy moments and milestones in the family’s life. (The journal would become a critical piece of evidence in the lawsuits that were still years away.)
The couple says they were a bit nervous about their new house payment, even though their new home was half the size of their previous house. Renee was particularly leery of their new payment but their loan officer said they could immediately seek a modification after the closing. (We have spoken with enough loan officers to know that some lenders actually instruct their employees to say these things to borrowers.)
Want a Loan Modification? Skip a Payment!
As noted above, the Sundquists were current on their mortgage payments and had an 800+ credit score. Their great credit score would be the first of many casualities when they listened to a bank representative who told them to skip three payments in order to qualify for a loan mod.
In her journal wrote, “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…”
The fateful decision to listen to Bank of America was in 2008. Almost a full decade later, the nightmare continues today.
Dual Tracking, “Lost Paperwork”
That missed payment started a years’ long “cat and mouse game” of dual tracking. Banks can’t pursue both foreclosure and modification options simultaneously but they often do.
The court records say that on twenty different occasions, the Sundquists submitted loan modification requests only to have the bank say they were lost, never received, incomplete or stale. While one bank rep was threatening foreclosure, another was promising to work with the family to achieve a modification.
For the Sundquists, the emotional distress and daily pressure was reaching the boiling point.
“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.
Confirmed they received packet. Confirmed they did not need anything more. After several weeks we received a request for pay stubs. They had been sent with the first and second packets.”
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.”
Bank of America Loan Modifications “Not Real”
In the end, one honest bank employee admitted the modifications were “not real.” They were simply a way “to create funds for the bank before foreclosure.”
Backs against the wall and facing an immediate foreclosure, the Sundquists filed bankruptcy in 2010.
Bank Violates Bankruptcy Stay
Under federal law, the filing of a bankruptcy automatically stops all collections actions against the debtor. This includes foreclosures. Banks all know and understand how the bankruptcy code’s “automatic stay” provision works. Bank of America is no exception. In fact, the bank has its own bankruptcy unit and detailed procedures to handle bankruptcy filings.
Bank of America does not deny it received the Sundquists’ bankruptcy filing. Despite having notice of the bankruptcy, however, the bank never canceled the foreclosure sale. Days later the bank sold the property to themselves.
Illegal Foreclosure and Eviction
Thinking the foreclosure sale may have been accidental, the Sundquists’ bankruptcy lawyer let the bank know that they were in violation of the stay. It apparently didn’t matter, however.
The foreclosure sale was just one of many violations of the automatic stay. According to the court, “Bank of America committed at least six further automatic stay violations … as it bulled forward.”
The bank started eviction proceedings to remove the Sundquists from their home. The bank’s foreclosure trustee, ReconTrust, began knocking on the windows of the home and following the family as they came and left the home. The family was terrorized. Their 10 year old screamed when a man began banging on a glass door demanding entry.
None of this legal, of course, especially since the foreclosure itself was illegal.
Ultimately the Sundquist family was served with a notice to vacate the premises. They were given just three days to move out.
Adding to the family’s misery, Bank of America continued to suggest that they could still modify their loan.
Fearing that they had just hours to get out, the family fled leaving behind many of their possessions.
Thinking that their home was gone and the ordeal over, the family 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.
Even though they restored title to the Sundquists, another arm of the bank went to the home and began removing their possessions from the home. In effect, they looted the home. The bank can’t locate the property taken and won’t pay for their misconduct.
Only months later did the bank gave the Sundquists back their keys. If that wasn’t bad enough, the bank demanded the couple pay months of mortgage expenses and maintenance fees even though during that time the bank did nothing to maintain the property. In fact, they looted it!
The Sundquists File Suit Against Bank of America
In 2011, the Sundquists had enough. They sued Bank of America.
Their lawsuit was filed in California Superior Court. Unfortunately, Bank of America convinced the trial judge to dismiss the suit.
Undaunted, the Sundquists appealed. They also filed complaints with the Office of Comptroller of Currency and the CFPB.
As the lawsuits, appeals and regulatory complaints were being sorted out, the Sundquists finally got a break. An internal email revealed that the entire modification process was a scam. According to the court, “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 lost her mother. 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 the banks offer to pay.
Bank of America Suffers Two Court Defeats
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 their cases were pending, the bank was called to answer for its actions by the Consumer Financial Protection Bureau. Judge Klein found that noteworthy because the lied to the CFPB and denied that they had foreclosed on the Sundquists’ home. The bank even denied that they had been sued by the couple.
Anyone facing the loss of their home knows just how stressful the process can become. In this case, the stresses became too much. Many precious household goods are gone forever. Eric Sundquist attempted suicide. Renee went from being a member of the Italian Olympic skating team to now suffering from heart problems, 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 arrogance to a whole new level.
Amendments to the automatic stay provisions of the Bankruptcy Code give courts the power to award damages as well as attorneys’ fees. Judge Klein ruled that damages can include claims for emotional distress.
The law also allows an award of punitive damages in “appropriate circumstances.”
Were there “appropriate circumstances here? Yes!
The court found that “the stay violations were visited upon individuals who had already endured eighteen months of trying to deal with Bank of America in an effort to obtain a mortgage modification. Throughout that period, Bank of America was playing, in bad faith, a ‘dual tracking’ game of talking loan modification while actually moving towards foreclosure. That process was so trying that it produced in the Sunquists a state of battle – fatigued demoralization.”
So why did Bank of America behave this way? Judge Klein believes it was greed. Bank of America has little incentive to kill a goose that keeps laying 6 percent golden eggs when the federal funds rate is 0.39 percent and the average mortgage rate is 3.45 percent.”
Did Bank of America offer a defense? They did. They said it took a couple days to enter the bankruptcy filing information into their computer system. The court was not impressed. Judge Klein said, “The my-computer-made-me-do-it excuse is merely a form of the sort of ‘internal disorder’ that is no defense.”
Bank of America Suffers from Corrupt Corporate Culture
We represent many bank employees. They come to us after their pleas and complaints to senior management are ignored. Our complaint with banks isn’t with the rank and file workers. Most try to do an honest job.
The court in this case found Bank of America had showed a “callous and reckless” disregard for the law. The bank’s management structure and corporate culture are corrupt. According to Judge Klein, the harm suffered by the Sundquists was not that of “rogue employees betraying an upstanding employer.”
[This story deals with Bank of America but we believe the corporate culture at many lenders is simply to corrupt and broken to repair. Wells Fargo, Ocwen, Allied Home Mortgage, Freedom Mortgage, HSBC, the list goes on.]
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.
Call for Bank Whistleblowers
At least weekly we hear from a bank worker concerned about on-going bank misconduct. This includes loan modification paperwork that is simply shredded when there is insufficient staff to process the information. Computer systems that are designed to not communicate with others in the organization. Providing customers disconnected phone numbers. Dual tracking. Sending complex modification responsibilities to poorly trained offshore call centers or insuring there isn’t enough staff to process them.
The best way to catch these illegal schemes is through whistleblowers. They are in the best position to know where the fraud occurs.
Why would anyone wish to become a whistleblower? Most do so because they are frustrated about their inability to stop the fraud. Sometimes would be whistleblowers come to us after they suffer from retaliation or are ignored.
Under the federal False Claims Act, whistleblowers with inside information about corporate wrongdoing involving government funds are eligible for an award. Currently the Justice Department and HUD are interested in servicing cases making this the best time to become a whistleblower.
Awards in False Claims Act cases can be substantial. Awards in the millions are not uncommon. (The financial services cases we have been involved in over the last 5 years have generated over $150,000,000.00 in awards)
Even if no award is available under the False Claims Act, whistleblower awards can also be made for inside information under FIRREA (Financial Institutions Reform, Recovery and Enforcement Act). Although those awards are capped at $1.6 million, the awards apply to a wider range of banking violations and do not require a loss of government funds.
The whistleblower award programs also have anti-retaliation provisions designed to protect workers who bravely step forward.
We know that the overwhelming majority of bank workers are great people. Finding a way to bring justice to taxpayers and homeowners requires assistance. Can we count on you for help? Our firm proudly represents whistleblowers. (We also represent financial service workers who are improperly denied overtime.)
For more information and to schedule a no obligation, no cost consultation, give us a call. Attorney Brian Mahany can be reached at or by telephone at 414-706-6731. You can also visit our False Claims Act Whistleblower information and our FIRREA Whistleblower pages for more info.
Mahany Law and Judge, Lang & Katers – America’s Whistleblower Lawyers