HSBC will pay $470m (£325m) to settle US federal and state charges over the bank’s involvement in dubious mortgage lending and loan origination practices which fueled the financial crisis.
HSBC reached an agreement to a $100 million fine and $370 million in consumer relief.
“We are pleased to have reached this settlement and believe it is a positive result that benefits American homeowners and the US housing industry,” said Kathy Madison, the chief executive officer of HSBC Finance Corp.
HSBC will pay $40.5 million to the federal government, $59.3 million will go into an escrow fund administered by states to make payments to borrowers who lost their homes to foreclosure between 2008 and 2012, and $200,000 will be paid to reimburse the state attorneys general for investigation costs.
By July 2016, HSBC will have to 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.
Forbearance occurs when the lender gives the borrower time to catch up. The lender puts off seizing the borrower’s asset.
In addition, the bank will have to implement new standards for the servicing of mortgage loans, the handling of foreclosures and for ensuring the accuracy of information provided in federal bankruptcy court.
“This agreement is the result of a coordinated effort between federal and state partners to hold HSBC accountable for abusive mortgage practices,” said Acting Associate Attorney General Stuart F. Delery. “This agreement provides for $370 million in creditable consumer relief to benefit homeowners across the country and requires HSBC to reform their servicing standards. The Department of Justice remains committed to rooting out financial fraud and holding bad actors accountable for their actions.”
“This settlement illustrates the department’s continuing commitment to ensure responsible mortgage servicing,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “The agreement is part of our ongoing effort to address root causes of the financial crisis.”
“Even as the mortgage crisis recedes, the U.S. Trustee Program will continue to combat mortgage servicer abuse of the federal bankruptcy laws so that homeowners are given their legal right to try to save their homes,” said Director Cliff White of the Justice Department’s U.S. Trustee Program.
“Homeowners in financial distress sometimes depend on chapter 13 bankruptcy to help them catch up on their payments. When banks violate bankruptcy laws at the expense of homeowners and other creditors, they must pay a price. This settlement holds HSBC accountable for its actions and helps to protect the most vulnerable homeowners.”
Source: “Justice Department Reaches $470 Million Joint State-Federal Settlement with HSBC to Address Mortgage Loan Origination, Servicing and Foreclosure Abuses” – US Department of Justice