HSBC Bank will be paying $470 million to settle charges that it mishandled mortgage origination, servicing, and foreclosure duties, with much of the money going to consumers who lost their homes or suffered other adverse outcomes because of HSBC's actions.
The agreement was reached by a joint federal-state task force including the U.S. Justice Department, the Department of Housing and Urban Development (HUD), and the Consumer Financial Protection Bureau, along with 49 state attorneys general and the District of Columbia’s attorney general.
“This agreement is the result of a coordinated effort between federal and state partners to hold HSBC accountable for abusive mortgage practices,”
“This agreement provides for $370 million in creditable consumer relief to benefit homeowners across the country and requires HSBC to reform their servicing standards," said Acting Associate Attorney General Stuart F. Delery. "The Department of Justice remains committed to rooting out financial fraud and holding bad actors accountable for their actions.”
“This agreement not only provides relief to borrowers affected by HSBC’s past practices, it puts in place protections for current and future homeowners through tough mortgage servicing standards,” said Iowa Attorney General Tom Miller. “For years we’ve worked together to hold mortgage servicers responsible for their past conduct. We’re doing that here through this settlement and we’ll continue to address bad conduct in the future.”
Under the agreement announced today, HSBC has agreed to provide more than $470 million in relief to consumers and payments to federal and state parties, including:
- HSBC will pay $100 million: $40.5 million to be paid to the settling federal parties; $59.3 million to be paid into an escrow fund administered by the states to make payments to borrowers who lost their homes to foreclosure between 2008 and 2012; and $200,000 to be paid into an escrow fund to reimburse the state attorneys general for investigation costs.
- By July 2016, HSBC will complete $370 million in creditable consumer relief directly to borrowers and homeowners in the form of reducing the principal on mortgages for borrowers who are at risk of default, reducing mortgage interest rates, forgiving forbearance, and other forms of relief.
- HSBC will be required to implement standards for the servicing of mortgage loans, the handling of foreclosures, and for ensuring the accuracy of information provided in federal bankruptcy court.
What to do
Eligible borrowers will be contacted about how to qualify for payments. The HSBC agreement requires the company to provide certain borrowers with loan modifications or other relief. The modifications include principal reductions and refinancing for underwater mortgages.
Hundreds of thousands of borrowers whose loans were serviced by HSBC and who lost their home to foreclosure from January 1, 2008 through December 31, 2012 and encountered servicing abuse will be eligible for a payment from the national $59.3 million fund for payments to borrowers. The borrower payment amount will depend on how many borrowers file claims.
The settlement requires HSBC to substantially change how it services mortgage loans, handles foreclosures, and ensures the accuracy of information provided in federal bankruptcy court.
The terms will prevent past foreclosure abuses, such as robo-signing, improper documentation, and lost paperwork.
“There has to be one set of rules for everyone, no matter how rich or how powerful, and that includes lenders who engage in abusive business practices,” said New York Attorney General Eric T. Schneiderman. “The settlement announced today is a joint partnership that will create tough new servicing standards that will ensure fair treatment for HSBC’s borrowers and provide relief to customers across New York State and across the country.”