Susan Richardson, a Bank of America foreclosure victim, certainly hopes so. With bated breath she’s following a drama currently playing out in a California bankruptcy court.
“Battle-fatigued demoralization” is how Judge Christopher Klein described the condition of Erik and Renee Sundquist when he fined Bank of America a sweet $45 million for having illegally foreclosed on their home in Lincoln, California. The couple had been in the trenches for more than eight years doing battle with the same Mega-Bank that had led thousands of homeowners down a primrose path to foreclosure. It was all done via smoke and mirrors — a very tricky-dicky maneuver — and the spiel to homeowners desperate for modifications went like this: stop paying your monthly loan payments, don’t send us any more checks, then we’ll consider your for mod. Counter-intuitive, yes, but the Sundquists hoping for a more affordable monthly nut during hard economic times took the bait (they had previously been up-to-date with payments). They quickly found that bait turned into bait and switch. Like thousands of others they fell victim to what’s known as “dual tracking.” On one hand Bank of America officials continued to encourage the couple to apply for a modification — some 20 applications were fielded by the Sundquists — but with a sleight of the other hand, Bank of America was quietly rolling out foreclosure’s red carpet. Eventually, the bank got what it wanted: the Sundquist’s home, and all the couple got was agita rising to the level of PTSD. Erik Sundquist was sent packing to the hospital with a stress-related heart condition. Renee Sundquist attempted suicide. Judge Klein, reviewing the case, found that the stream of applications proffered by the Sundquists were “routinely either lost or declared insufficient, or incomplete or stale or in need of resubmission or denied without comprehensible explanation.”
In the wake of 2008’s sub-prime chaos homeowners across the country have been wrung through the same wringer as the Sundquists; squeezed out of home and hearth and left out to dry. Count some seventeen million victims. Bereft of cash and without inclination to challenge Big Boy Bankers in a rigged court system (think Florida’s infamous “rocket dockets”: a foreclosure conveyor belt designed to move homeowners out with alacrity). For those with a touch of amnesia let me offer up 99 Homes, the absolutely brilliant 2015 flic, starring Andrew Garfield, that detailed the human tragedy wrought in one epicenters of the housing crisis: Florida
Florida is also where Susan Richardson calls home and her story follows the same track as the Sundquists. In the wake of Hurricane Katrina and Dennis — followed by the tragic oil spill in the Gulf of Mexico — Florida’s real estate took a nose-dive and wiped away any hope that Susan could use the equity in her home to purchase a smaller house for cash. The next best option was cutting her monthly mortgage nut; a request she made to the bank in 2010. The powers-that-be told her she’d have to be at least three months in arrears to qualify for a government sponsored HAMP modification. Uncomfortable with this arrangement she made another inquiry to Bank of America’s CEO, Brian Moynihan, and was instructed by his office to pay a reduced monthly amount and submit HAMP applications (some forty pages in length). After enduring sixteen months of Kafkaesque insanity her check was refused. She was also denied a modification.
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What’s most disconcerting about tip toeing through this rough terrain is that when you’ve got stage 4 lung cancer — forced to take sips of oxygen when stressed out, which, for Susan, is often — the fight becomes Sisyphean in nature. Susan despite her illness remained driven. Part of her strategy was to write long imploring letters to the aforementioned Brian Moynihan hoping he’d cast a sympathetic eye on her predicament and fix the disconnects.
Nice try but the letters fell on very deaf ears.
She asked me if I might publish one of her pieces.
I told her, honestly, there’s little chance that any posted letter would catch Moynihan’s eye. Foreclosure victims often resort to personal pleas to their victimizers and nearly all of them wind up in the circular files next to the corporate shredder. Even if this heartless sot read it, I told her, there was zilch chance that it would impact his world view; one which he detailed in a 2011 CNBC interview with supremely unpleasant CNBC pundit Larry Kudlow. With Moynihan’s nodding assent Kudlow asserted a win/lose nostrum held by most in the mortgage industry
KUDLOW: Isn’t it fair to say the faster the foreclosure, the better off we’re going to be? And I know there’s pain. But of course, some people lose, other people win. Young families come in, they’re going to get very low prices. But the point is, the faster we clear out the unsold inventory, the sooner this country might start creating jobs in a real economic growth situation.
A recommendation from a friend, Isabel Santamaria, put Susan in contact with lawyer Rich Kalinoski (Isabel, a Florida mother with two autistic children, has her own horrid Bank of America tale to tell). Taking on Susan’s case with a crusader’s enthusiasm — a sentiment shared by a growing number of foreclosure-fighting lawyers — he’s on a legal mission to expose the kinds of shenanigans that remain an active legacy of Wall Street’s subprime slash and burn campaigns; namely, the unabated use of patently fraudulent documents. Much of this came to light during 2010’s well-publicized revelations of robo-signing and as Rich points out this remains a critical problem when defending foreclosure victims.
In nearly every action brought, there is some form of misleading information filed within the court system by the bank servicers. Under the law, the Plaintiff has the burden to prove they are a proper party to the action, and have the right or authority to foreclose on the property. On occasion, the appellate courts will unleash a decision that dismisses Plaintiffs action based on deficient testimony or documentary evidence. However, a dismissal without prejudice will ultimately lead to a new filing and it will be highly likely that fraudulent documents will be utilized to correct the deficiencies in the prior action.
In layman’s terms even if a defendant manages to get a dismissal often it will be “without prejudice” — a fancy way of saying that the action can again be brought at a later date — leaving already victimized defendants feeling as if they’re spinning around in a clothes dryer like some hazed fraternity initiate.
Storied bankruptcy attorney, Linda Tirelli, highlighted the on-going use of fraudulent foreclosure documents in a recent piece of mine:
I no longer count how many cases I see involving fraud against unsuspecting homeowners. Just to remind myself that it’s a fraudulent document I’m reading, I went on-line and for $9.99 and bought my own rubber stamp (with a red-ink pad). What does it say? “WTF!” in big letters.
Judge Klein’s decision on behalf of the Sundquists seems to further justification for the use of bankruptcy courts in taking on Wall Street but in an ironic twist his providing a confidentiality component has raised objections by the other beneficiaries of the proposed $45 million settlement. Five California law schools and two consumer groups claim confidentiality gives succor to a financial institution whose bad behavior can continue to remain hidden from prying eyes. Unfortunately, Judge Klein now faces a Hobson’s choice in trying to do the right thing by the Sundquists who stand to collect a reported $6 million dollar chunk of the settlement.
No surprise: Bank of America is on-board with the confidentiality agreement.
So, what other avenues exist for a legal redress of homeowner’s grievances?
Well there’s always the class action route although many consumer advocates claim that this generally enriches law firms and not members of the “class.”
My personal favorite is RICO: short for Racketeer Influenced and Corrupt Organizations. First employed as a legal tool to dismember the mob this federal statute does have sharp enough teeth to tear away at another alleged criminal enterprise: Mega-Banks. In 2012 I wrote a piece for American Banker, Will R-I-C-O Spell ‘Relief’ for B of A Mortgage Borrowers? featuring the informed opinion of some consumer lawyers that RICO (which has both a criminal and civil component) should have taken on Bank of America after the acquisition of Angelo Mozilo’s Countrywide Financial; an acquisition that brought with it a surfeit of violations of securities and consumer protection laws (ignored, thanks in great part, to the inaction of the Obama-era Department of Justice).
Is it possible that RICO — like the proverbial cavalry — might come riding to the homeowner’s rescue?
In Susan Richardson’s case any legal relief can’t come soon enough.
Joel Sucher is a co-founder of Pacific Street Films (together with Steven Fischler) and has written for a number of platforms including American Banker, In These Times, Huffington Post and Observer.com.