New York sues HSBC for breaking foreclosure law
State legal chief says bank giant failed to file paperwork to allow homeowners to settle loans
New York attorney general Eric Schneiderman yesterday filed a suit against HSBC Holdings, accusing the bank of breaking state foreclosure law and putting homeowners at greater risk of losing their homes.
A state investigation found that HSBC has left homeowners languishing in foreclosure by failing to meet requirements for giving them an opportunity to negotiate loan modifications, according to Schneiderman's office.
"Companies like HSBC are brazenly ignoring state law, leaving homeowners across New York stuck in legal limbo where they can't even get the legally required settlement conference that could help them keep their homes," Schneiderman said in a statement.
Lenders and servicers who sue to foreclose in New York must file paperwork that triggers a requirement that a settlement conference be held within 60 days.
The state found that HSBC failed to file the required paperwork in hundreds of foreclosure cases in New York, in some cases putting off the document filing for more than two years.
HSBC continued to charge interest and fees, increasing the amounts owed by homeowners. Those charges reduced the likelihood a person would qualify for a loan modification because their principal balance had increased, according to the state.
Schneiderman will seek to recover restitution and damages for homeowners and force HSBC to file the required papers in pending foreclosure actions and future cases.
Dominic Chan, an analyst at BNP Paribas, said he expected the impact on HSBC would be insignificant as the group had already provided for the foreclosure.
HSBC had reached an agreement with federal regulators over alleged foreclosure abuses in January, by providing US$249 million in cash compensation and other assistance to borrowers.
Under the deal with the Federal Reserve and the Office of the Comptroller of the Currency, the bank offered US$96 million in direct cash payments to borrowers and US$153 million worth of other relief, including loan modifications and the forgiveness of deficiency judgments.
The settlement covered 112,000 borrowers whose homes were in foreclosure in 2009 and 2010 and whose loans were serviced by the bank or its subsidiaries.