Bank of American Class-Action Certified: Countrywide via LandSafe used inflated Real Estate Appraisals

First a little background.  On February 6, 2018 a California federal judge certified a nationwide class of borrowers accusing Countrywide Financial Corporation of using inflated real estate appraisals to inflate its loan origination business from 2003 to 2008, overturning successor Bank of America’s claims that borrowers won’t be able to back up their racketeering claims with  proof.

The class-action covers borrowers who received an appraisal from LandSafe Inc. between 2003 to 2008 in connection with a loan that was originated by Countrywide. Countrywide, that owned LandSafe, was acquired by Bank of America in July 2008. LandSafe was sold and is now owned by CoreLogic Inc.

The Plaintiffs have submitted substantial evidence that could be used to prove an alleged RICO scheme existed.  The lead attorney is Roland Tellis who believes the class-action reflects the fact that borrowers were scammed by phony appraisals but never received a refund, despite the fact that there have been massive settlements with regulators and investors.

The suit states that prior to the financial crisis, Countrywide and LandSafe “knowingly, fraudulently, systematically and uniformly” generated false appraisals so Countrywide could close as many home loans as possible.  Borrowers were required to use LandSafe to close, but thought they were paying for an independent, objective appraisal service when the appraisals had a “predetermined value”  to ensure the loans would close rapidly.

The plaintiffs claim they were charged between $300 and $600 each for allegedly corrupt appraisals.  While it is great news that the courts are starting to recognize that a mass-fraud was perpetrated on homeowners, it is unlikely the Appellate court will see the situation the same way as the lower court.  There is also the fact that most class-members receive much in the way of compensation.  The cases typically settle once the numbers get high enough to satisfy the class-action attorneys.

However, there is still a lot of proof that will come out if the case is isn’t settled quickly — damaging proof.  And it is worth noting that the Judge is giving at least some credence to the idea that the entire mortgage meltdown was based upon multiple frauds perpetrated by the banks — not 30 million people waking up one morning and deciding to borrow more than they could afford. I might add that affordability is the responsibility of the lender, not the borrower.  See TILA.  It is presumed by all lending laws that borrowers lack the sophistication to understand the deal they are signing.

Matt Taibbi likened securitization and Goldman Sachs in particular to a vapid squid with many tentacles reaching into the pockets and lives of millions of people. I would extend the analogy further if memory serves, to wit: the squid has three hearts. Appraisal fraud at the instigation of the banks was one of the hearts of the illegal securitization fail scheme — a plan that was, at its heart, nothing more than a Ponzi scheme. They could mollify investors by having them receive monthly payments and even encourage the investors to buy more “mortgage bonds.”
It was the purchases of those bogus securities that fueled everything. When that stopped the entire system collapsed — the hallmark of every Ponzi scheme. And it all happened because of the revolving door between Wall Street and regulators who quickly discovered that by accepting placement inside a regulatory agency, they could emerge within 2 years and take jobs at salaries that were geometrically higher than where they started.
So the people who were working as regulators didn’t want to kill the golden goose, much the same as the appraisers who ultimately caved under pressure from the banks. Of all people the appraisals and the banks knew exactly what was happening. And people who worked in the agencies were loathe to restrain or punish the banks because the banks were their next employer. It was no accident that so many agencies and even the Fed were asleep at the wheel. They were not asleep. They were just biding their time until they left the agency and took a job with the perpetrator of the scheme that they were charged with monitoring.
The banks were flooding the market with money — other people’s money, not their own. I personally witnessed the appraisal fraud in Arizona on several closings where in each case the appraiser came back with an appraisal that pegged the value of the property $20,000 higher than the contract price. In each case the appraiser was given the contract or at least the contract price and the direct or tacit instruction to come back with an appraisal that made the deal appear viable. It wasn’t. Looking at the Case-Schiller Index it is easy at a glance to see how PRICE was driven far above VALUE of property. All housing prices and values were closely related to household income. There was no spike in income for household, but prices were moved ever higher by the banks who were manipulating appraisers.
In 2005 8,000 appraisers petitioned Congress saying that they were being coerced into false appraisals. They either did the appraisal as instructed or they would never see another appraisal job. Congress ignored it. Many appraisers dropped out of the market. The rest were tempted by oversize fees (that in many cases were partially kicked back to the loan originator) or felt compelled to stay in the market because they had nowhere else to go.
The banks were trying all sorts of ways to maximize the amounts of money being moved from the investment sector to the benefit, as it turned out, of themselves and nobody else. The entire time they were driving demand up for loans sold by fraudulent promises from mortgage brokers, who in some cases were convicted felons who had been found guilty of economic crimes. At one point there were 10,000 felons who were registered as salesman for loan products that had no possibility of being sustained.
And it wasn’t that the banks were unaware of the defective loans that violated TILA in multiple ways. They were counting on it. On the way up they sold defective loan products that were never subjected to due diligence by anyone. They, above all others, knew the loans would fail; in fact they were counting on it. They were betting against the performance of the loans by negotiating insurance contracts for either the loans or the “mortgage bonds” or both and selling derivative futures that in many cases were disguised sales of entire loan portfolios that were never owned by the “Seller.”
The big payoff came when the loans and the “mortgage bonds” failed and all sorts of people and entities were caught having to either cough up money or declaring bankruptcy. The AIG insurance [packages were specifically written such that AIG would NOT be subrogated and be able to make claims on the underlying loans nor the “mortgage bonds”].  For a few dollars in premiums the suckers on Wall Street had bought themselves a world of trouble.
Appraisal fraud lies at the heart of the scheme. The illusion of an ever-climbing market kept people refinancing their property, buying overpriced property, and, most importantly buying bogus “mortgage bonds” issued by the underwriter of the bonds utilizing the fictitious name of a REMIC Trust. This was the holy grail of securities underwriting: what if you could sell shares of a nonexistent entity, keep the proceeds, and then sell securities and contracts that derived from the nonexistent value of the Trust?
The average homeowner knows nothing of any of this and reasonably relied upon the representations by sellers of defective loan products; besides reposing trust in such entities just because they appeared to be an institutional lender, borrowers believed the rationale that banks would not lend money they knew they would never collect. That would be true if the banks were making loans. In truth, they were intermediaries with contractual and legal duties to everyone with whom they did business. They breached those duties to everyone in multiple ways but none so glaring as appraisal fraud and kickbacks on fraudulent appraisal fees.

The judge also certified a subclass of Texas borrowers who are bringing an unjust enrichment claim under Texas law and appointed Baron & Budd PC and Hagens Berman Sobol Shapiro LLP to serve as class counsel.

All plaintiffs are represented by Hagens Berman Sobol Shapiro LLP and Baron & Budd PC

The cases are Waldrup v. Countrywide Financial Corp. et al., case number 2:13-cv-08833, and Williams et al. v. Countrywide Financial Corp. et al., case number 2:16-cv-04166, in the U.S. District Court for the Central District of California.

Royal Bank of Scotland Trained Employees on How to Forge Signatures

Fraud for the first time in history has been institutionalized into law.

It is foolishness to believe that the banking industry is trustworthy and that they have the right to claim legal presumptions that their fabricated documents, and the forged documents are valid, leaving consumers, borrowers and in particular, homeowners to formulate a defense where the banks are holding all the information necessary to show that the current foreclosing parties are anything but sham conduits.

Here we have confirmation of a practice that is customary in the banking industry today — fabricating and forging instruments that sometimes irreparably damage consumers and borrowers in particular. Wells Fargo Bank did not accidentally create millions of “new accounts” to fictitiously report income from those accounts and growth in their customer base.

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Across the pond the signs all point to the fact that the custom and practice of the financial industry is to practice fraud. In fact, with the courts rubber stamping the fraudulent representations made by attorneys and robo-witnesses, fraud for the first time in history has been institutionalized into law.

RBS here is shown in one case to have forged a customer’s signature to a financial product she said she didn’t want —not because of some rogue branch manager but because of a sustained institutionalized business plan based solidly on forgery and fabrication in which employees were literally trained to execute the forgeries.

The information is in the public domain — fabrication, robo-signing and robo-winesses testifying in court — and yet government and the courts not only look the other way, but are complicit in the pandemic fraud that has overtaken our financial industries.

Here are notable quotes from an article written by J. Guggenheim.

Once upon a time, in a land far, far away- forgery, fabrication of monetary instruments, and creating fake securities were crimes that would land you in prison.  If you forged the name of your spouse on a check it was a punishable crime.  The Big Banks now forge signatures and fabricate financial instruments on a routine basis to foreclose on homes they can’t prove they own, open accounts in unsuspecting customer’s names, and sign them up for services they don’t want.  If this isn’t the definition of a criminal racketeering enterprise- what is?

RBS, following the Wells Fargo Forgery model, conceded that a fake signature had been used on an official document, which means a customer was signed up to a financial product she did not want.  RBS’s confession comes only two weeks after whistle-blowers came forward claiming that bank staff had been trained to forge customer signatures. [e.s.]

The confession comes only two weeks after The Scottish Mail on Sunday published claims by whistle-blowers that bank staff had been trained to forge signatures.

At first, RBS strenuously denied the allegations, but was forced to publicly acknowledge this was likely a widespread practice. [e.s.]  The bank was forced to apologize publicly after retired teacher Jean Mackay came forward with paperwork that clearly showed her signature was faked on a bank document.  The great-grandmother was charged for payment protection insurance (PPI) back in 2008 even though she had declined to sign up for the optional product.

At first the bank refunded her fees but refused to admit the document was forged.  [e.s.]A forensic graphologist confirmed the signatures were ‘not a match’, forcing the bank to concede and offered her a mere £500 in compensation for their fraudulent act.

Forensic Graphologist Emma Bache, who has almost 30 years’ experience as a handwriting expert, examined the document and said the fundamental handwriting characteristics do not match.

The Banks in Britain, Australia, New Zealand and Canada, along with the United States include forgery and fabrication in their business models to increase profits.  Why shouldn’t they?  There is NO THREAT because they know they will not be held accountable by law enforcement or the courts- so they continue to fleece, defraud, and steal from their customers.

Homeowners must force an urgent investigation into claims of illegal practices by the banks.  Wells Fargo is not doing anything that CitiBank, JPMorgan Chase, Bank of America and others aren’t doing.  To remain competitive in an unethical marketplace, you almost have to resort to the same fraudulent tactics.[e.s.]

However, whistle-blowers have now revealed that managers were coached on how to fake names on key papers.  Whistle-blowers said that staff members had received ‘guidance’ on how to download genuine signatures from the bank’s online system, trace them on to new documents then photocopy the altered paperwork to prevent detection.  When in fact the bank taught its employees how to engage in criminal conduct.

Although clearly against the law, the whistle-blowers claim it was “commonly done to speed up administration and complete files.”  Just like American banks forge notes and assignments to ‘speed up foreclosures and complete files.’  They claim the technique was also used to sign account opening forms – and even loan documents. [e.s.]

Forgery

According to Justia.com, the “criminal offense of forgery consists of creating or changing something with the intent of passing it off as genuine, usually for financial gain or to gain something else of value.” This often involves creation of false financial instruments, such as mortgage notes, assignments, checks, or official documents. It can also include signing another person’s name to a document without his or her consent or faking the individual’s handwriting.  Forgery often occurs in connection with one or more fraud offenses. 

Maine Case Affirms Judgment for Homeowner — even with admission that she signed note and mortgage and stopped paying

While this case turned upon an  inadequate foundation for introduction of “business records” into evidence, I think the real problem here for Keystone National Association was that they did not and never did own the loan — something revealed by the usual game of musical chairs that the banks use to confuse and obscure the identity of the real creditor.

When you read the case it demonstrates that the Maine Supreme Judicial Court was not at all sympathetic with Keystone’s “plight.” Without saying so directly the court’s opinion clearly reveals its doubt as to whether Keystone had any plight or injury.

Refer to this case and others like it where the banks treated the alleged note and mortgage as being the object of a parlor game. The attention paid to the paperwork is designed by the banks to distract from the real issue — the debt and who owns it. Without that knowledge you don’t know the principal and therefore you can’t establish authority by a “servicer.”

The error in courts across the country has been that the testimony and records of the servicer are admissible into evidence even if the authority to act as servicer did not emanate from the real party in interest — the debt holder (the party to whom the MONEY is due.

Note that this ended in judgment for the homeowner and not an involuntary dismissal without prejudice.

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Hat Tip to Bill Paatalo

Keybank – maine supreme court

Here are some meaningful quotes from the Court’s opinion:

KeyBank did not lay a proper foundation for admitting the loan servicing records pursuant to the business records exception to the hearsay rule. See M.R. Evid. 803(6).

KeyBank’s only other witness was a “complex liaison” from PHH Mortgage Services, which, he testified, is the current loan servicer for KeyBank and handles the day-to-day operations of managing and servicing loan accounts.

The complex liaison testified that he has training on and personal knowledge of the “boarding process” for loans being transferred from prior loan servicers to PHH and of PHH’s procedures for integrating those records. He explained that transferred loans are put through a series of tests to check the accuracy of any amounts due on the loan, such as the principal balance, interest, escrow advances, property tax, hazard insurance, and mortgage insurance premiums. He further explained that if an error appears on the test report for a loan, that loan will receive “special attention” to identify the issue, and, “[i]f it ultimately is something that is not working properly, then that loan will not . . . transfer.” Loans that survive the testing process are transferred to PHH’s system and are used in PHH’s daily operations.

The court admitted in evidence, without objection, KeyBank’s exhibits one through six, which included a copy of the original promissory note dated April 29, 2002;3 a copy of the recorded mortgage; the purported assignment of the mortgage by Mortgage Electronic Registration Systems, Inc., from KeyBank to Bank of America recorded on January9, 2012; the ratification of the January 2012 assignment recorded on March 6, 2015; the recorded assignment of the mortgage from Bank of America to KeyBank dated October 10, 2012; and the notice of default and right to cure issued to Kilton and Quint by KeyBank in August 2015. The complex liaison testified that an allonge affixed to the promissory note transferred the note to “Bank of America, N.A. as Successor by Merger to BAC Home Loans Servicing, LP fka Countrywide Home Loans Servicing, LP,” but was later voided.

Pursuant to the business records exception to the hearsay rule, M.R. Evid. 803(6), KeyBank moved to admit exhibit seven, which consisted of screenshots from PHH’s computer system purporting to show the amounts owed, the costs incurred, and the outstanding principal balance on Kilton and Quint’s loan. Kilton objected, arguing that PHH’s records were based on the records of prior servicers and that KeyBank had not established that the witness had knowledge of the record-keeping practices of either Bank of America or Countrywide. The court determined that the complex liaison’s testimony was insufficient to admit exhibit seven pursuant to the business records exception.

KeyBank conceded that, without exhibit seven, it would not be able to prove the amount owed on the loan, which KeyBank correctly acknowledged was an essential element of its foreclosure action. [e.s.] [Editor’s Note: This admission that they could not prove the debt any other way means that their witness had no personal knowledge of the amount due. If the debt was in fact due to Keystone, they could have easily produced a  witness and a copy of the canceled check or wire transfer receipt wherein Keystone could have proven the debt. Keystone could have also produced a witness as to the amount due if any such debt was in fact due to Keystone. But Keystone never showed up. It was the servicer who showed up — the very party that could have information and exhibits to show that the amount due is correctly proffered because they confirmed the record keeping of “Countrywide” (whose presence indicates that the loan was subject to claims of securitization). But they didn’t because they could not. The debt never was owned by Keystone and neither Countrywide nor PHH ever had authority to “service” the loan on behalf of the party who owns the debt.]

the business records will be admissible “if the foundational evidence from the receiving entity’s employee is adequate to demonstrate that the employee had sufficient knowledge of both businesses’ regular practices to demonstrate the reliability and trustworthiness of the information.” Id. (emphasis added).

 

With business records there are three essential points of reference when several entities are involved as “lenders,” “successors”, or “servicers”, to wit:

  1. The records and record keeping practices of the initial “lender.” [If there are none then that would point to the fact that the “lender” was not the lender.] Here you are looking for the first entries on a valid set of business records in which the loan and fees and costs were posted. Generally speaking this does not exist in most loans because the money came a third party source who knows nothing of the transaction.
  2. The records and record keeping practices of any “successors.” Note that this is a second point where the debt is separated from the paper. If a successor is involved there would correspondence and agreements for the purchase and sale of the debt. What you fill find, though, is that there is only a naked endorsement, assignment or both without any correspondence or agreements. This indicates that the paper transfer of any rights to the “loan” was strictly for the purpose of foreclosing and bore new relationship to reality — i.e., ownership of the debt.
  3. The records and record keeping practices of any “servicers.” In order for the servicer to be authorized, the party owning the debt must have directly or indirectly given authorization and come to an agreement on fees, as well as given instructions as to what functions the servicer was to perform. What you will find is that there is no valid document from an owner of the debt appointing the servicer or giving any instructions, like what to do with the money after it is collected from homeowners. Instead you find tenuous documentation, with no correspondence or agreements, that make assertions for foreclosure. The game of musical chairs has bothered judges for a decade: “Why do the servicers keep changing” is a question I have heard from many judges. The typical claims of authorization are derived from Powers of Attorney or a Pooling and Servicing agreement for an entity that neither e exists nor does it have any operating history.

Another Countrywide Sham Goes Down the Drain

Banks use several ploys to distract the court, the borrower and the foreclosure defense attorney from the facts. One of them is citing a merger in lieu of presenting documents of transfer of the debt, note or mortgage. We already know that the debt is virtually never transferred because the transferor never had any interest in the debt and thus had no authority to administer the debt (i.e., as servicer).

So the banks have successfully pulled the wool over everyone’s eyes by citing a merger, as though that automatically transferred the note and mortgage from one party to another. Mergers come in all kinds of flavors and here the 5th Circuit in Florida recognizes that simple fact and emphatically states that the relationship between the parties must be proven along with proof that the note, or authority to enforce the note, must be proven by competent evidence.

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see Green v Green Tree Servicing Countrywide Home Loans et al 5D15-4413.op

*Judgment for Borrower (Involuntary Dismissal)
*Failure to provide evidence to explain relationships in mergers
*Failure to provide evidence of the terms of the merger and the transfer of the subject loan
* Failure to to provide evidence of standing at commencement of the lawsuit

An interesting side note to this case is that it never mentions the debt, which is the third rail of all claims of transfers and securitization. The opinion starts off with a recital of facts that differs from most other cases, to wit: it talks about how the homeowner signed the note and mortgage, and does not reference a loan made to him by the originator, Countrywide Home Loans (CHL).

The court remains strictly in the confines of who owns, controls or has the right to enforce the note — a fact that is relevant only if the note is evidence of an underlying debt. If no such debt exists between CHL and the homeowner, then the note is irrelevant — unless a successor possessor actually paid for it, in which case the successor could claim that it is a holder in due course and that the risk of loss shifts to the maker of the note under such circumstances.

The Green case here stands for the proposition that the banks may not paper over ownership or control or the right to enforce the note with vague references to a merger. The court points out that a merger might not include all the assets of one party or the other. More particularly, a merger, if it occurred must be proven along with some transfer of the subject note and mortgage.

And very specifically, the court says that entities may not be used interchangeably. The foreclosing party must explain the relationship between the parties affiliated with the “merged” entities.

[NOTE: Bank of America did not directly acquire CHL. CHL was merged into Red Oak Merger Corp., controlled by BofA. One of the reasons for doing it that way is to segregate questionable assets and liabilities from the rest of the BofA. BofA claimed ownership of CHL, and changed the name of CHL to BAC Home Loans. But it didn’t just change the name; it also made assertions, when it suited BofA that BAC was a separate entity, possibly an independent entity, which is also not true. So the Court’s objection to the lack of evidence on the merger is very well taken].

The Court also takes note of the claim that DiTech Financial was formerly known as Green Tree Servicing. That is not true. The DiTech name has been used by several different entities, been phased out, then phased in again. Again a reason why the court insists upon evidence that explains the actual relationship between actual entities, and not just names thrown around as though that meant anything.

Ultimately Green Tree, which no longer existed, was made the Plaintiff in the action. Some certificate of merger was introduced indicating a merger again, this time between DiTech Financial and GreenTree. In this lawsuit Green tree was presented as the surviving entity. But in all other cases DiTech Financial is presented as the surviving entity — or at least the DiTech name survived. There is considerable doubt whether the combination of Green Tree was anything more than rebranding an operation merging out of the Ally Financial bankruptcy and ResCap operations.

A sure sign of subterfuge is when the lawyer for the foreclosing party attempts to lead the court into treating multiple independent companies as a single entity. That, according to this court, would ONLY be acceptable if there was competent evidence admitted into the court record showing a clear line of succession such that a reasonable person could only conclude that the present successor company in fact encompasses all of the business activities and assets of the predecessors or, at the very least, encompasses a clear chain of possession, title and authorization of the subject loan.

[PRACTICE NOTES: Discovery of actual merger documents and documents of transfer should be vigorously pursued against expected opposition. Cite this case as mandatory or persuasive authority that the field of inquiry is perfectly proper — as long as the foreclosing entity is attempting tons the mergers and presumptive transfers against the homeowner.]

 

 

 

NO TRUST ASSETS: In the eye of the storm

This is one more nail in the coffin of false securitization: the only assets attributed to apparent “Buyers” were those related to and including servicer advances. By severing the investors from their positions as creditors, the banks were able to create the illusion that they — or their “originators”, brokers, nominees, fronts and sham operators — were the owners of the debt. NONE of the “transfers” of the “loan documents” involved a purchase and sale of a loan. NONE of the original “loan documents” referred to an actual transaction between the homeowner and the originator. That is because at the base of the paper chain was an entity that served only as a conduit for the paperwork and which had nothing to do with the advance of money to or on behalf of any homeowner. The paper trail and the money trail diverged the moment the loan papers were executed.

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Hat tip to CC who wrote to me with the following:

In the eye of the storm

I also wanted to share with you the LinkedIn career history of a young “document specialist” who claims familiarity with executing and creating loan documents. (Document specialist Matt Byas maintains a profile on LinkedIn.) He worked his way up through such foreclosure/loan mod fraud luminaries as Saxon Mortgage (Dennis G. Stowe, COO, later acquired by Ocwen), Bank of America (where his job was “filing back several file folders containing loan information and processing them at various points along the line as well”), Homeward Residential, Inc. (later acquired by Ocwen, received $1.31B in TARP money, disbursed $280M) where his job included “creating allonges”), Residential Credit Solutions, Inc. (plaintiff in the successfully appealed judgement above, beneficiary of Geithner’s first, entirely bogus PPIP auction and another less well-known, similar sweetheart deal with Tim and Amtrust’s loans in 2010, which led to the $2M verdict for the Illinois widow in Hammer vs RCS, receiver of $43M in TARP money, $6.6M spent aiding borrowers, dissolved in 2016 by 2013 acquirer MTGE after non-stop quarterly losses from the point of acquisition onwards, and again featuring Dennis G. Stowe, CEO). His services were also utilized at a law firm that collapsed into a spectacular heap of revealed fraud, Butler & Hosch, P.A., and a loan servicer prone to deals so distant from comprehensibility that they had to issue this clarification to a press release in 2009:
No actual mortgage loans were part of the transaction. The acquired assets consisted principally of advances made on behalf of borrowers who are in arrears and of the Master Servicing Rights pursuant to which the loans are serviced. (e.s.) Mortgage servicing consists of collecting payments from homeowners, remitting them to appropriate parties and managing the default cycle. The transaction with Citi Residential Lending is similar to AHMSI’s earlier acquisitions from Option One and other sellers of servicing. In addition, while $1.5 billion has been described in a number of media reports as a “payment” in the transaction for the Master Servicing Rights, the vast portion of this amount is related to outstanding servicing advances.”
That loan servicer, American Home Mortgage Servicing, Inc. eventually changed its name to Homeward Residential, and the document specialist no longer names it as a separate entity on his LinkedIn profile.

CA law schools will receive awarded damages after wrongful foreclosure by Bank of America

This decision is brilliant. If this actually is paid (which is some time off) then the large award to the homeowners who will gift most of it to the law schools in California will have penetrated academia and therefore the education of law students who will learn, for the first time, what is wrong with virtually all the foreclosures in the United States.

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A federal bankruptcy judge awarded $45 million in punitive damages for wrongful foreclosure to a Sacramento couple on March 23rd — much of which will go to University of California law schools.

The judge ruled the couple will give each of the five campuses — UC Berkeley School of Law, UC Davis School of Law, UC Hastings College of Law, UCLA School of Law and UC Irvine School of Law — $4 million of the punitive damages. The couple will receive a little over $1 million in actual damages despite suffering years of abuse by their loan servicer Bank of America.

Additionally, the judge ruled that $10 million of the punitive damages to both the National Consumer Bankruptcy Rights Center and the National Consumer Law Center.  No comment if the couple believes a punishment of $1 million dollars compensates them for the trauma, health issues and life altering experience Bank of America subjected them to.

According to court documents, the couple filed a chapter 7 bankruptcy case to clear debt, thus enhancing their ability to pay Bank of America on a modified loan. After a discharge of the chapter 7 case, the couple received no benefit to their credit profile. The couple faced with “imminent foreclosure,” caused them to file a subsequent Chapter 13 case  in order to move forward with loan modification.  The combination of a Chapter 7 bankruptcy discharge followed by a Chapter 13 filing is sometimes referred to as a “Chapter 21”.  This sequence allows a debtor to discharge unsecured debt in the Chapter 7 and then file a Chapter 13 to deal with secured debt.

Bank of America expressed their understanding that their performance in this foreclosure was not satisfactory and that they have since changed their processes in a public statement.  Where have we heard that before?  At this time criminal charges should apply.

“We believe some of the court’s rulings are unprecedented and unsupported, and we plan to appeal,” the statement from Bank of America said.  This case showcases the fraud and incompetence that occurs by loan servicers who are attempting to engineer a foreclosure through intimidation and other illegal tactics.  Bank of America participates in this type of unconscionable fraud on a daily basis.  Despite a $45 million dollar fine, when you are making billions of dollars by illegally foreclosing, this is hardly a dent in the bucket.

Download Sundquist v. Bank of America opinion here

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

https://www.vice.com/en_us/article/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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