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HSBC Agrees to Pay $470 Million to Settle Mortgage Abuse Allegations

money-and-gavelThe Department of Justice [1] (DOJ) announced Friday that HSBC Bank [2]has reached a settlement [3]with several federal agencies and almost every state attorney general regarding "mortgage origination, servicing, and foreclosure abuses."

HUD [4], the Consumer Financial Protection Bureau [5], and 49 state attorneys general and the District of Columbia’s attorney general, were all other parties involved in the settlement.

According to the DOJ, HSBC has agreed to pay $470 million in consumer relief and payments to federal and state parties, and will now be bound to mortgage servicing standards and be subject to independent monitoring of its compliance with the agreement.

“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. "The Department of Justice remains committed to rooting out financial fraud and holding bad actors accountable for their actions."

Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division noted,"This settlement illustrates the department’s continuing commitment to ensure responsible mortgage servicing. 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.”

The Federal Reserve also hit HSBC with a $131 million penalty [6] on Friday "for deficiencies in residential mortgage loan servicing and foreclosure processing," according to an separate, but related, announcement on their site.

The Fed said that the penalty reviewed HSBC's "unsafe and unsound practices and foreclosure activities" and can be resolved by "providing borrower assistance or remediation in conjunction with the Department of Justice settlement, or by providing funding for nonprofit housing counseling organizations."

If HSBC does not satisfy the full penalty amount within two years, the remaining amount must be paid to the U.S. Department of Treasury, the Fed noted.

HSBC was not immediately available for comment at the time of publication.

According to the DOJ, under the terms of the agreement in the settlement, HSBC is required to:

“Mortgage servicers have a responsibility to help struggling borrowers remain in their home, not to push them into foreclosure,” said General Counsel Helen Kanovsky of HUD.  “This agreement is another example of how multiple agencies in the federal government and state attorneys general across the country are working to make sure the mortgage industry treats consumers fairly.”