HSBC reaches US$470M settlement over foreclosure policies during recession
The deal also requires the bank to develop new standards for how it services loans and handles foreclosures
WASHINGTON—Banking giant HSBC has reached a $470 million settlement with the U.S. federal government and nearly all states over mortgage lending and foreclosure abuses that officials say helped intensify the country’s economic meltdown, the Justice Department announced Feb. 5.
The agreement requires the bank to pay $100 million and to provide an additional $370 million in consumer relief to borrowers and homeowners, including by reducing mortgage interest rates as well as the principal on mortgages for homeowners who are at risk of default.
The deal also requires the bank to improve standards for how it services loans and handles foreclosures.
Officials say those changes are intended to discourage past banking practices, such as “robo-signing” and poor-quality loans, that exacerbated a financial crisis starting in 2007 in which millions of Americans lost their homes to foreclosure. HSBC had already agreed in a separate 2013 deal with Federal Reserve and the Office of the Comptroller of the Currency to pay $249 million to settle federal complaints that its U.S. division wrongfully foreclosed on homeowners who should have been allowed to stay in their homes.
“This settlement illustrates the department’s continuing commitment to ensure responsible mortgage servicing,” Benjamin Mizer, head of the Justice Department’s Civil Division, said in a statement. “The agreement is part of our ongoing effort to address root causes of the financial crisis.”
The settlement involves the departments of Justice and Housing and Urban Development, and the Consumer Financial Protection Bureau. Attorneys general from 49 states plus the District of Columbia signed on.
The $100 million payment will mostly be distributed among the federal government and an escrow fund administered by the states to make payments to borrowers who lost their homes to foreclosure between 2008 and 2012. The $370 million in relief to homeowners already is underway, the Justice Department said.
Even so, the settlement did little to allay public criticism that the Justice Department has been soft on banking abuses and has not targeted individuals for financial misdeeds.
Bartlett Naylor, a financial policy advocate at Public Citizen, a watchdog and advocacy group, said a “strongly written press release is no substitute for true justice.”
“There must be human beings involved,” said Naylor, who argued that the Justice Department was overinflating the impact and public benefit of the HSBC deal. “This can’t be yet another immaculate fine, where the government alleges widespread fraud and yet no individual was responsible.”
The agreement does not prevent state or federal authorities from pursuing criminal action in the future.
An independent monitor will be appointed to oversee the bank’s compliance with the settlement terms.