The national mortgage lender and servicer HSBC and the attorney general’s office have reached a $470 million joint state-federal settlement to address mortgage origination, servicing and foreclosure abuses.
The settlement will provide direct payments to many Massachusetts and Connecticut borrowers and higher mortgage servicing standards and compliance oversight from an independent monitor.
The AG’s office has additionally reached a separate assurance of discontinuance addressing allegations that HBSC offered teaser interest rate reductions to Massachusetts borrowers. These reductions increased the likelihood that the borrowers would lose their homes, violating HSBC’s obligation to make a “good faith effort” to avoid foreclosure, according to the AG.
HSBC will pay $40.5 million of the $470 million to 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, which includes principal reduction and refinancing for underwater mortgages.
Approximately 1,000 Massachusetts homeowners and 643 Connecticut borrowers who lost their homes to foreclosure will be eligible for monetary payments and will be contacted about how to apply for such. The settlement also includes new consumer protections that require HSBC to substantially change how it services mortgage loans and handles foreclosures in an effort to prevent previous abuses. An independent monitor will ensure mortgage servicer compliance.
In a separate assurance of discontinuance, the AG alleges that HSBC violated a Massachusetts foreclosure law, Section 35B of G.L. Chapter 244, 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, resulting in numerous void foreclosures affecting the marketability and insurability of the titles, according to the AG.
In accordance with the settlement, HSBC will pay a total of $750,000 to the state of Massachusetts and provide permanent loan modification relief in both Massachusetts and Connecticut. In Massachusetts, HSBC will also help facilitate cures of title issues resulting from unlawful foreclosures.
