Friday, January 27, 2012

UFAN files new lawsuit against U.S. Bank on behalf of borrowers for mortgage practices

On January 13, 2012 UFAN Legal Group, PC filed suit against U.S. Bank in San Diego County Superior Court (case number 37-2012-00065195-CU-OR-EC) on behalf of borrowers allegedly injured by the Bank's lending and servicing practices.

The complaint alleges that U.S. Bank schemed to profit from reckless and negligent lending practices that ensured borrowers would default on their mortgages. US Bank is alleged to have abandoned its own underwriting standards in an effort to originate as many mortgages as possible for immediate sale on the secondary mortgage market. The complaint argues that because US Bank could immediately sell mortgages and get fully compensated, it incentivized fraud by loan officers and brokers by offering high origination fees on subprime loans.

According to the complaint, Plaintiffs allege US Bank acted negligently in both the origination and modification of Plaintiff's loans. Plaintiffs argue that US Bank "wore two hats" - one of a purported lender of money and one as a developer and seller of residential mortgage backed securities (RMBS). By taking on such a dual role, US Bank was no longer acting as a mere lender of money, but instead acting as a middleman in marketing and selling loans. US Bank breached its duty by abandoning traditional underwriting standards and encouraging the origination of predatory loans, the complaint alleges.

The complaint alleges that U.S. Bank used falsified borrower information including credit ratings and income, as well as inflated property appraisals, as part of the origination process. It is argued that US Bank incentivized property appraisers and loan originators to falsify this information in order to place borrowers in larger and more harmful loans. The higher the loan amount, the more money U.S. bank was able to make on the sale of the RMBS to investors. The complaint suggests that Plaintiffs borrowed excessively in reliance on this falsified information and were harmed by the excessive debt burden.

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