Judge Orders Bank of America to Redo Settlement in Mortgage Dispute
October 05 2017 - 01:46PM
Dow Jones News
By Katy Stech Ferek
The bankruptcy judge handling a dispute between Bank of America
Corp. and a California couple who were mistakenly foreclosed on
refused to approve a settlement that would end their lawsuit on
Wednesday.
Judge Christopher Klein ordered both lawyers for the bank and
for Renee and Erik Sundquist to renegotiate parts of the agreement
that he said would "give me heartburn." He didn't specifically
state which parts of the confidential settlement he didn't
like.
The settlement would end a dispute between the bank and
Sundquists, who have fought since the economic recession to save
their home. In a March ruling, Judge Klein called the bank "brazen"
and "heartless" in its treatment of the couple.
Lawyers for the Sundquists said in earlier court papers that the
settlement would enable them "to end a long personal and legal
nightmare that has impacted every facet of their and their sons'
lives." The bank threatened to appeal, which could have prolonged
the case for years.
"They have a powerful wish to be done with it," Judge Klein said
of the Sundquists, who brought their son to court on Wednesday.
Judge Klein agreed to review the new terms of the settlement at
an Oct. 18 hearing.
At Wednesday's hearing, Bank of America lawyer Jonathan Hacker
described the settlement as a "very substantial amount of money."
Lawyers wouldn't state the exact amount of the settlement but
implied that it was larger than what the Sundquists would have
taken in under the court ruling. The earlier court order called for
the bank to pay the couple nearly $6.1 million in damages.
Several consumer advocacy nonprofits and law schools have called
for the settlement details to be revealed, calling them a matter of
public interest. In earlier court papers, the groups said "there is
no indication...what steps, if any, the bank has taken to remediate
the systemic failures identified in this court's opinion."
Throughout Wednesday's hearing, Mr. Hacker defended the bank's
request for confidentiality, saying that the details would put the
bank at a disadvantage when settling similar disputes.
The push for details came from five law schools -- Berkeley,
Davis, Irvine, Los Angeles and San Francisco's UC Hastings --
associated with the University of California system as well as to
two consumer-advocacy nonprofits, the National Consumer Law Center
and the National Consumer Bankruptcy Rights Center.
The law schools and nonprofits got involved with the bankruptcy
case after Judge Klein said that most of the roughly $45 million
fine against Bank of America should be directed to them. Under the
settlement, the groups wouldn't collect any money.
The couple's trouble with the bank traces to March 2009, when
they stopped making mortgage payments after Bank of America
officials said they wouldn't consider loan modifications for
customers who were current on payments. In the following years,
their roughly 20 loan-modification requests were "routinely either
lost or declared insufficient, or incomplete or stale or in need of
resubmission or denied without comprehensible explanation," the
judge's ruling said.
The couple filed for bankruptcy in June 2010. Filings halt
foreclosure sales, but the judge said the bank still improperly
took the home and gave them a three-day eviction notice. The couple
moved out, and Ms. Sundquist was hospitalized with stress-related
symptoms of a heart attack several weeks later.
Bank of America officials eventually reversed the sale. The
couple moved back in several months later and received a $20,000
fine from their homeowner association for dead landscaping, the
ruling said.
The ordeal prompted Judge Klein to issue in March what
consumer-bankruptcy advocates believe is the largest fine
originating from an individual bankruptcy dispute. His excoriating
107-page court opinion, which declared the bank's actions
Kafkaesque, included excerpts from Renee Sundquist's journal that
documented harassing visits from bank-related officials and Mr.
Sundquist's suicide attempt after the couple discussed their
frustrations over the house.
In the ruling, Judge Klein said the fine was meant to be large
enough that it wouldn't "be laughed off in the boardroom as petty
cash or 'chump change.'"
Write to Katy Stech Ferek at katherine.stech@wsj.com
(END) Dow Jones Newswires
October 05, 2017 13:31 ET (17:31 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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