AG secures $1 million for Washington homeowners in legal action against HSBC for mortgage abuses

At least 1,300 Washington borrowers eligible to receive up to $1,400 in cash payments

SEATTLE – February 8, 2016 – (RealEstateRama) — Attorney General Bob Ferguson today announced Washington homeowners will recover $1 million, as part of a $470 million agreement secured for homeowners nationwide through a state-federal legal action against mortgage lender and servicer HSBC.

The agreement provides $59.3 million in direct payments to 75,000 consumers nationwide for past foreclosure abuses. Washington’s share of approximately $1 million will be available for 1,300 borrowers. The amount each borrower receives depends on how many submit a claim, and is estimated to be $800-$1,400 each. HSBC will also pay $40.5 million to the federal government.

The agreement also provides $370 million in nationwide loan modifications and other relief for borrowers in need of assistance, imposes tough new mortgage servicing standards, and grants oversight authority to an independent monitor.

“HSBC engaged in unacceptable, abusive practices that hurt Washington homeowners,” Ferguson said. “My office will not tolerate companies that don’t play by the rules and treat borrowers unfairly. This action holds HSBC accountable to compensate Washington families who lost their homes, assist those in danger of foreclosure, and abide by tough new serving standards.”

Background

According to a complaint filed in U.S. District Court for the District of Columbia, HSBC engaged in a number of practices that harmed consumers, including:

• Failing to timely and accurately apply payments made by borrowers and failing to maintain accurate account statements;
• Charging unauthorized fees for default-related services;
• Failing to provide accurate and timely information to borrowers who sought information about loss mitigation services, including loan modifications;
• Improperly denying loan modification relief to eligible borrowers;
• Providing false or misleading reasons for denial of loan modifications; and
• “Robo-signing” affidavits in foreclosure proceedings, where an employee signed thousands of documents and affidavits without verifying the information.

As a result, HSBC violated homeowners’ rights and protections, engaged in premature and unauthorized foreclosures, and charged consumers improper fees and charges.

Similar terms to 2012 National Mortgage Settlement

The agreement’s mortgage servicing terms largely mirror the 2012 National Mortgage Settlement (NMS) reached in February of 2012 between the federal government, 49 state attorneys general — including Washington — and the five largest national mortgage servicers:  Ally/GMAC, Bank of America, Citi, JPMorgan Chase and Wells Fargo. That agreement has provided consumers nationwide with more than $50 billion in direct relief, created tough new servicing standards, and implemented independent oversight.

Subsequent state-federal agreements with Ocwen Financial Corp. for more than $2 billion and with SunTrust Mortgage Inc. worth nearly $1 billion were announced in December 2013 and June 2014, respectively.

Payments to borrowers

Washington borrowers whose loans were serviced by HSBC and who lost their home to foreclosure from Jan. 1, 2008 through Dec. 31, 2012 and encountered servicing abuse will be eligible to file a claim for repayment from the national $59.3 million fund. The borrower payment amount will depend on how many borrowers file claims.

Eligible borrowers will be sent a postcard from the Washington State Attorney General’s Office with information on how to qualify for payments.

Loan modifications

The HSBC agreement requires the company to provide borrowers with loan modifications or other relief. The modifications include principal reductions and refinancing for underwater mortgages.

HSBC has stated that most of the loan modifications have already occurred. By the end of the one-year period specified in the agreement, HSBC must have met all of its $370 million loan modification obligations. While the number and amount of Washington state loan modifications is unknown at this time, more specifics will become available as the independent monitor reviews compliance.

New mortgage servicing standards

The agreement also requires HSBC to substantially change how it services mortgage loans, handles foreclosures, and ensures the accuracy of information provided in federal bankruptcy court.

The terms will prevent past foreclosure abuses — such as robo-signing, improper documentation and lost paperwork — from continuing in the future.

The agreement creates dozens of new consumer protections and standards, including:

• Making foreclosure a last resort by first requiring HSBC to evaluate homeowners for other options;
• Restricting foreclosure while the homeowner is being considered for a loan modification;
• Providing new procedures and timelines for reviewing loan modification applications;
• Giving homeowners the right to appeal denials;
• Requiring a single point of contact for borrowers seeking information about their loans; and
• Maintaining adequate staff to handle calls.

Independent monitor

The National Mortgage Settlement’s independent monitor, Joseph A. Smith Jr., will oversee HSBC agreement compliance for one year. Smith served as the North Carolina Commissioner of Banks from 2002 until 2012, and is also the former Chairman of the Conference of State Banks Supervisors (CSBS). 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.

State and federal action

The agreement includes Washington and 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).

Questions? Contact HSBC

For loans serviced by HSBC Bank, inquiries should be addressed to 1-866-435-7085. For loans serviced by HSBC Mortgage Services, Household Finance or Beneficial, inquiries should be addressed to 1-800-333-7023.

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The Office of the Attorney General is the chief legal office for the state of Washington with attorneys and staff in 27 divisions across the state providing legal services to roughly 200 state agencies, boards and commissions. Attorney General Bob Ferguson is working hard to protect consumers and seniors against fraud, keep our communities safe, protect our environment and stand up for our veterans. Visit www.atg.wa.gov to learn more.

Contact: Peter Lavallee, Communications Director, (360) 586-0725; PeterL (at) atg.wa (dot) gov

– See more at: http://www.atg.wa.gov/news/news-releases/ag-secures-1-million-washington-homeowners-legal-action-against-hsbc-mortgage#sthash.d19sKYTo.dpuf