Amber, because you purchased the home as a bank owned home (REO), the bank would not have known if there was a problem with the basement. I'm thinking you did not have a professional home inspector inspect the property.
If you can prove that the bank or listing agent had known about the defect, I would think you would have a good case to attempt to collect money from them to pay for the damage. The most important aspect of this business is to disclose all known facts affecting the property. Good luck.