$470 Million Settlement with HSBC Addresses Mortgage Servicing, Foreclosure, and Origination Abuses
HSBC Bank and federal and state agencies attempts to keep homeowners in their homes and avoid foreclosure. The agreement requires HSBC to work with homeowners to find an alternative to foreclosure and imposes penalties for prior misconduct. Specifically, newly imposed standards on HSBC help homeowners avoid foreclosure by requiring the loan servicer to work with homeowners to find alternative solutions.
The Justice Department released a statement describing the settlement reached between HSBC and a number of federal and state agencies. The settlement “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.
This settlement, among many others, is evidence of federal and state authorities ensuring homeowners are protected from abusive mortgage servicing practices. Other examples of similar settlements include the $25 billion National Mortgage Settlement agreed to in February 2012 between the federal and state agencies and the five largest national mortgage servicers. Additionally, a $968 million settlement was reached in June 2014 between the same federal and state agencies and SunTrust Mortgage, Inc. These agencies state that they are confident this settlement and others will help protect vulnerable homeowners from banks violating the law.
Not only does the agreement provide relief to the victims of HSBC’s past practices, it also implements protections for current and future homebuyers by imposing tougher mortgage servicing standards.
According to General Counsel Helen Kanovsky of the Department of Housing and Urban Development, “mortgage servicers have a responsibility to help struggling borrowers remain in their home, not to push them into foreclosure.” She states she is confident the collaboration between federal and state authorities will continue to “address bad conduct in the future.”
The settlement itself provides several forms of relief to consumers, payments to federal and state agencies, and HSBC agrees to be bound to heightened mortgage servicing standards and their practices are subject to independent review to determine whether HSBC are in compliance with the agreement. Specifically, HSBC is required to pay $100 million to state and federal agencies, complete $370 million in “creditable consumer relief” directly by reducing the principal on mortgages who are at risk of default, reducing mortgage interest rates, and many other forms of relief.
Several new standards are imposed that promote fair homeowner dealing. These new standards apply to the handling of foreclosures, designed to prevent the abuses of the past (improper documentation, lost paperwork, etc.), provide oversight of the foreclosure processing, and new review requirements that apply to certain documentation filed in bankruptcy court. These standards are imposed in the hopes that foreclosure is a “last resort” because they require HSBC to evaluate homeowners for alternatives to foreclosure.
The full Department of Justice press release can be found here.
The full HSBC Consent Judgment Order can be found here.