February 8, 2016

State Enforcement Spotlight – HSBC

By the C|C Whistleblower Lawyer Team

This State Enforcement Spotlight features HSBC. On Friday, Attorney General Eric Schneiderman announced a $470 million joint state-federal settlement with mortgage lender and servicer HSBC to address mortgage origination, servicing, and foreclosure abuses. The terms will prevent past foreclosure abuses, such as robo-signing, improper documentation and lost paperwork. See NY AG Press Release.

The settlement includes New York, 48 other states, the District of Columbia, the U.S. Department of Justice (DOJ), the U.S. Department of Housing and Urban Development (HUD), and the Consumer Financial Protection Bureau (CFPB). Additionally, the settlement provides direct payments to New York borrowers for past foreclosure abuses, loan modifications, and other relief for borrowers in need of assistance, rigorous mortgage servicing standards, and grants oversight authority to an independent monitor. It is estimated that New York State has nearly 136,000 HSBC loans, nearly 31% of HSBC’s total portfolio.

“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 Attorney General 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.”

The settlement’s consumer protections and standards include: making foreclosure a last resort by first requiring HSBC to evaluate homeowners for other loss mitigation options; restricting foreclosure while the homeowner is being considered for a loan modification; procedures and timelines for reviewing loan modification applications; giving homeowners the right to appeal denials; and requiring a single point of contact for borrowers seeking information about their loans and maintaining adequate staff to handle calls.

The National Mortgage Settlement’s independent monitor, Joseph A. Smith Jr., will oversee HSBC agreement compliance for one year. Smith will oversee implementation of the servicing standards required by the agreement and issue public reports that identify whether HSBC complied or fell short of the standards imposed by the settlement. If HSBC is alleged to have violated terms of the agreement, the states and federal agencies can seek relief through the court.

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