HSBC to Pay $470M to Settle Mortgage Claims

(CN) - HSBC Bank has agreed to pay $470 million for accusations of wrongful mortgage origination, servicing and foreclosures, the government said Friday.

The deal parallels a $25 billion settlement reached in 2012 and a $968 million agreement from 2014, according to the U.S. Department of Justice.

The national mortgage settlement, or NMS, was finalized in March 2012. The nation's five largest mortgage lenders - Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial - agreed to settle foreclosure-abuse claims for $25 billion.

The five banks' alleged failures included charging excessive fees when an account enters default, failing to maintain accurate account statements, improper oversight of third-party contractors and misleading borrowers.

In June 2014, SunTrust Mortgage reached a similar agreement, consenting to a $968 million payment for allegedly abusive mortgage practices.

HSBC's settlement negotiations began after the announcement of the NMS. The deal resolves allegations "based on HSBC's deficient mortgage loan origination and servicing activities," according to a Justice Department press release.

In addition to paying $470 million to consumers and federal and state entities, the bank also agreed to stipulated mortgage-servicing standards and independent monitoring of its compliance.

Of the total payment, $370 million will go to reducing mortgage interest rates, forgiving forbearance and reducing the principal on mortgages for certain borrowers at risk of default, the government said. Another $59 million will be put into an escrow fund for states to make payments to borrowers who lost their homes to foreclosure between 2008 and 2012.

In addition, HSBC will pay over $40 million to federal parties and $200,000 to state attorneys general for investigation costs.

The New York City-based bank must also implement standards for mortgage servicing, the handling of foreclosures and making sure that information provided in bankruptcy court is accurate.

Those measures aim to prevent issues like "robo-signing" of documents and lost paperwork, according to the Justice Department, which said that foreclosure should be a last resort after the evaluation of other loss-mitigation options.

HSBC is also not allowed to foreclose on a property when the homeowner is being considered for a loan modification.

A consent judgment finalizing the agreement will be filed in Washington, D.C., Federal Court, the government said. The deal involves federal agencies and 49 state attorneys general, as well as the attorney general of the District of Columbia.

An independent monitor, Joseph A. Smith Jr., who also monitors the NMS and SunTrust settlements, will oversee HSBC's compliance with the deal.

State and federal authorities are still allowed to pursue criminal actions against HSBC, and individual borrowers can file their own lawsuits.

Benjamin Mizer, head of the Justice Department's Civil Division, said in a statement that the 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," Mizer said.

Helen Kanovsky of the Department of Housing and Urban Development said that mortgage companies "have a responsibility to help struggling borrowers remain in their home, not to push them into foreclosure."

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