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Bank of America : Judge Orders Bank of America to Redo Settlement in Mortgage Dispute

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10/05/2017 | 07:32pm CET
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 [email protected]

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