AG’s Office Reaches Separate Agreement with HSBC that Provides Direct Relief to Massachusetts Borrowers
BOSTON – February 8, 2016 – (RealEstateRama) — A $470 million joint state-federal settlement has been reached with national mortgage lender and servicer HSBC to address mortgage origination, servicing, and foreclosure abuses, Attorney General Maura Healey today announced.
AG Healey joins 49 other states, the District of Columbia, U.S. Department of Justice (DOJ), U.S. Department of Housing and Urban Development (HUD), and the Consumer Financial Protection Bureau (CFPB) in the consent judgment, filed today in the U.S. District Court for the District of Columbia.
The settlement will provide direct payments to hundreds of borrowers in Massachusetts, along with rigorous mortgage servicing standards and compliance oversight from an independent monitor.
The AG’s Office has also reached a separate assurance of discontinuance, filed today in Suffolk Superior Court, which addresses allegations that HBSC offered teaser interest rate reductions to Massachusetts borrowers that ultimately increased the likelihood that they would lose their homes, violating HSBC’s obligation to make a good faith effort to avoid foreclosure. Under the terms of the agreement, HSBC will pay an additional $750,000 and provide relief to Massachusetts homeowners for violation of the state’s foreclosure law.
“Today’s settlements hold HSBC accountable for its unlawful practices and provide immediate relief to struggling Massachusetts borrowers who lost their homes or face foreclosure,” AG Healey said. “With strict servicing standards in place, HSBC will be required to ensure fairness and take critical steps to prevent past foreclosure abuses.”
The mortgage servicing terms under today’s multistate settlement largely mirror the 2012 historic national settlement involving the nation’s five largest mortgage servicers, which addressed unlawful foreclosures and unfair loan servicing practices.
Of the $470 million, HSBC will pay $40.5 million to the federal agencies, and close to $60 million will be paid to the states to be distributed to HSBC borrowers who lost their homes to foreclosure from Jan. 1, 2008 through Dec. 31, 2012. The settlement also includes $370 million in consumer relief by HSBC nationwide, including items such as principal reduction and refinancing for underwater mortgages.
It is estimated that nearly 1,000 Massachusetts borrowers who lost their homes to foreclosure will be eligible for monetary payments. Borrowers will be contacted about how to apply for payments.
The settlement also includes new consumer protections that require HSBC to substantially change how it services mortgage loans and handles foreclosures. The terms will prevent past abuses, such as robo-signing, improper documentation and lost paperwork. An independent monitor will ensure mortgage servicer compliance.
In a separate assurance of discontinuance reached with HSBC, the AG’s Office alleges that HSBC violated a Massachusetts foreclosure law, Section 35B of G.L. Chapter 244. This landmark law, passed in 2012, requires creditors to make a good faith effort to avoid foreclosure for mortgage loans that were made with abusive subprime terms.
According to the AG’s Office, HSBC violated this law by offering borrowers facing foreclosure temporary modifications that did not consider the borrower’s ability to repay the mortgage debt over the life of the loan. Borrowers often defaulted after the temporary modification expired.
The settlement also resolves claims that HSBC unlawfully foreclosed on properties when they did not own the mortgages. The AG’s Office alleges that HSBC’s unlawful conduct resulted in numerous void foreclosures affecting the marketability and insurability of the titles.
Under the terms of the settlement, HSBC will pay a total of $750,000 to the Commonwealth, provide permanent loan modification relief as required by state law to eligible borrowers, and facilitate cures of title issues resulting from unlawful foreclosures.
Consumers who need assistance or have questions can call the AG’s HomeCorps Division at (617) 573-5333 or visit www.mass.gov/ago/homecorps.
Today’s settlement with the AG’s Office was handled by Assistant Attorneys General Lisa Dyen and Justin Lowe of the Consumer Protection Division, and Claire Masinton of the Insurance and Financial Services Division, with assistance from Assistant Attorney General Michael Lecaroz and Legal Analyst Maja Kazmierczak of AG Healey’s HomeCorps Division.