LANSING – February 9, 2016 – (RealEstateRama) — Michigan Attorney General Bill Schuette today announced a $470 million joint state-federal settlement with mortgage lender and servicer HSBC to address mortgage related abuses. Michigan borrowers are expected to receive over $3.5 million as part of the nationwide settlement.
The money will provide direct payments to borrowers for past foreclosure abuses, loan modifications and other relief for borrowers in need of assistance. The settlement also includes more rigorous mortgage servicing standards, and grants oversight authority to an independent monitor.
“This settlement will provide needed financial relief to Michigan borrowers who were negatively affected by unfair mortgage practices executed by HSBC,” said Schuette. “The settlement also includes further protections and stricter operating practices to make sure HSBC treats its borrowers much more fairly in the future.”
Additional parties to the settlement include: 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 U.S. Consumer Financial Protection Bureau (CFPB).
National Mortgage Settlements in Michigan
The settlement complements the $25 billion 2012 National Mortgage Settlement (NMS) and the SunTrust Mortgage Inc. Settlement of over half a billion dollars. Like the previous settlements, HSBC’s settlement stems from allegations of misconduct related to mortgage loans, including origination, servicing and foreclosure.
Borrowers Eligible for Payment
Michigan borrowers whose loans were serviced by HSBC and who lost their home to foreclosure from January 1, 2008 through December 31, 2012 and encountered servicing abuse will be eligible for a payment from the national $59.3 million fund for payments to borrowers. The borrower payment amount will depend on how many borrowers file claims.
Eligible borrowers will be contacted directly with instructions for receiving a payment. Additional information will be posted on the Attorney General’s website at www.michigan.gov/ag when it becomes available. Consumers can also call the Attorney General’s Office toll-free at 1-877-765-8388.
Apart from payments to borrowers who have gone through foreclosure, the HSBC agreement also requires the company to provide loan modifications or other relief to some borrowers. The modifications, which HSBC chooses through an extensive list of options, include principal reductions and refinancing for underwater mortgages. HSBC decides how many loans and which loans to modify, but must meet certain minimum targets. Because HSBC receives only partial settlement credit for many types of loan modifications, the settlement will provide relief to borrowers that will exceed the overall minimum amount.
Mortgage Servicing Standards
The settlement 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.
The settlement’s consumer protections and standards include:
- Making foreclosure a last resort by first requiring HSBC to evaluate homeowners for other loss mitigation options;
- Restricting foreclosure while the homeowner is being considered for a loan modification;
- 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.
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.
The agreement resolves potential violations of civil law based on HSBC’s deficient mortgage loan origination and servicing activities. The agreement does not prevent state or federal authorities from pursuing criminal enforcement actions related to this or other conduct by HSBC, or from punishing other wrongful conduct.
Additionally, the agreement does not prevent any action by individual borrowers who wish to bring their own lawsuits.
The agreement has been filed as a consent judgment in the U.S. District Court for the District of Columbia.
For loans serviced by HSBC Bank USA, N.A., borrowers with questions should call 1-866-435-7085 or call their case manager. For loans serviced by HSBC Mortgage Services, Household Finance, or Beneficial, borrowers with questions should call 1-800-333-7023 or contact their single point of contact.
Contact: Andrea Bitely 517-373-8060