Wachovia Lawsuit

A recent Newsday article indicates that the number of fraud claims related to the U.S. mortgage industry is on the rise. According to estimates, upwards of one in five cases that result in mortgage foreclosure are settled out of court. While the figure may be an underestimation due to a lack of accurate data, it illustrates the risks that homeowners face when filing for bankruptcy to recover from their losses. The case of U.S. v. Ups, No. 16-CV-2138 bears this out.

On August 4, 2008, Robert C. Ups attempted to obtain mortgage loans from two banks in Connecticut, Bank of America and Wachovia, by falsely presenting himself as a Wachovia loan officer. Ups was employed by Wachovia to assist in its process of underwriting and closing on mortgage loans for potential borrowers. When he applied for a second loan through Bank of America, however, he was denied. According to court records, he was then charged with fraud after conceiving the idea that he would be able to profit from selling Wachovia mortgage foreclosures.

Robert C. Ups has pleaded guilty to fraud in the fourth degree. This level of fraud relates to those acts of deception that cause real financial harm to another person. As defined in the federal Fair Credit Reporting Act (FCRA), the federal law that regulates consumer credit reporting, fraud is any misrepresentation made by a debtor to a lender or other person that results in a denial of credit. In addition to requiring banks to investigate and provide credit to victims, the FCRA requires that lenders make reasonable efforts to investigate and remove fraudulent transactions. A victim can recover damages based on the amount of fraud they suffered.

Federal law mandates that Wachovia perform an internal investigation to investigate fraud accusations. Pursuing the case after fraud has been perpetrated allows the bank to more effectively address the impact of the fraud to the institution. The bank must also establish a process for providing notice to the accused that will allow them to pursue legal remedies. If no evidence of fraud is found, the bank must notify the victim and provide him or her a final settlement if the victim does not find proof of the bank’s fraud.

The lawsuit was filed on behalf of the victim, who is now required to repay the full amount of his or her original loan. According to court records, the bank has already settled the matter outside of court. The terms of the settlement were not disclosed in public court records. Ups has yet to file an appeal with the US Circuit Court of Appeals. If he does, it could take months before the court rules on the case.

Accusations of fraud are not isolated to Wachovia. In fact, the lawsuit against Wachovia is just one of many that have recently been filed. As of this writing, five lawsuits have been filed. Each claims a different reason for the loss of funds, and thus, a different remedy. The goal is to hold the bank accountable for their actions in a timely manner so justice can be served.

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