Years in the making, Bank of America was recently fined $45M for improperly handing a residential foreclosure proceeding in California that lead to a couple wrongfully losing their home. Sounds like an ultra stiff penalty at first glance, but this ruling comes with some interesting lessons for anyone knocking on the door of financial hardship.
During the height of the housing crisis, Erik and Renee Sundquist were forced to close their construction business. They sold their home and moved to a less expensive house just outside of Sacramento. In conjunction with buying the new home, they took out a mortgage in the amount of $590,000. from a lender that assured the Sundquists that their loan would soon be modified so as to reduce their monthly mortgage payments.
However, before the loan was modified, the original lending company was taken over by the Bank of America. (It’s typical for a company that services loans to change and/or be taken over by another lending company during the life of a mortgage.) The Sundquists repeatedly asked Bank of America to honor the agreement they had had with the original lender but Bank of America denied their requests. Why? Bank of America said they were not eligible for a loan modification because they were current on their monthly payments.
Bank of America instead recommended that the Sundquists simply stop making payments and default on the loan as a condition of their eligibility for a modification. The Sundquists were totally baffled. This couple, who had a 800+ credit score at the time and had never missed a payment on any loan account, did what the bank told them to do. Even after that, Bank of America continued to turn down the Sundquists – some twenty times. They then, in 2010, filed for Chapter 13 bankruptcy as a result of B of A’s denials thinking that the bankruptcy filing would (and should have) stopped any foreclosure proceedings.
On the contrary, Bank of America continued eviction proceedings, a violation of the law. The Bank also, according to the ruling of the court, “…staked out the premises, tailed the Sundquists, knocked on doors and windows and rang doorbells…all to the terror of the Sundquist family.”
When this case finally was heard in court in 2017, Judge Christopher Klein fined Bank of America $45M “…as a way to ensure that my ruling wouldn’t be laughed off in the boardroom as petty cash or ‘chump change.'” The bulk of this fine is to be distributed to consumer advocacy groups and to several law schools in California.
How can you protect yourself from such practices and abuse suffered by the Sundquits? It is crucial that borrowers keep paper trails of their banking and mortgage statements. If you as a borrower see any discrepancies in those statements, contact the loan servicer in writing and keep a copy for yourself. The loan servicer must correct any discrepancy and/or mistake within 30 days. And, if the loan servicer changes, as it did in the Sundquist’s case, the borrower must be contacted in writing about that change within 15 days.
The last word on this goes to Linda Sherry, the director of the non-profit Consumer Action. “Chief among everything else is persistence. It may be tiring frustrating and annoying but you have to keep going.”