HSBC Holdings Plc will pay $470 million to end U.S. probes into allegations of foreclosure abuses including robo-signing that may have deprived struggling borrowers of opportunities to keep their homes.
Federal and state officials said on Friday that the bank’s North American subsidiaries reached a settlement with the U.S. Justice Department, federal housing and consumer protection regulators and 49 states as well as the District of Columbia.
The HSBC settlement paves the way for smoother loan modifications and provides for payments to some borrowers for past foreclosure abuses, according to a statement from the Justice Department. The bank will also be required to reform its practices, and an independent monitor will be installed to oversee the changes, according to the statement.
The settlement “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,” New York Attorney General Eric Schneiderman, who was one of the officials involved in the accord, said in a statement. HSBC’s 136,000 loans in New York state account for more than 31 percent of the bank’s mortgage portfolio, according to Schneiderman.
Kathy Madison, chief executive officer at HSBC Finance Corp., said the bank viewed foreclosures as a last resort throughout the market downturn.
“This agreement affirms our commitment to assisting customers who are facing financial difficulties,” Madison said.
The agreement follows a series of joint federal and state initiatives aimed at addressing the causes of the financial crisis that began in 2008 and helping to put the market back on track.
Previously, a separate federal-state working group reached multibillion-dollar settlements with lenders including Bank of America Corp., Citigroup Inc. and JPMorgan Chase & Co. related to mortgage-backed securities. Schneiderman was made co-chairman of that group.
State and federal officials also joined forces to tackle servicing issues by striking a $25 billion deal in 2012 with five companies over robo-signing and other foreclosure abuses, including the handling of documents. The agreement with HSBC, which wasn’t among those companies, “closely mirrors” the earlier servicing settlement, Schneiderman said.
The HSBC settlement includes payments of $100 million and consumer relief valued at $370 million, according to the Justice Department. Of the cash payment, $59.3 million will go to states to compensate borrowers who lost homes to foreclosure from 2008 and 2012. Separately, the bank will pay $131 million to resolve Federal Reserve claims over deficiencies in residential mortgage-loan servicing and foreclosure processing.
Based on foreclosure numbers, California Attorney General Kamala Harris estimated her state would be eligible for about 10 percent of the $59.3 million fund.
“For years we’ve worked together to hold mortgage servicers responsible for their past conduct,” said Iowa Attorney General Tom Miller, who was also involved in the joint accord. “We’re doing that here through this settlement and we’ll continue to address bad conduct in the future.”