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February 5, 2016

Miller Reaches $470 Million Joint State-Federal Settlement with HSBC Over Mortgage Loan Origination, Servicing, and Foreclosure Abuses

Agreement to provide certain Iowa borrowers with loan modifications; foreclosed HSBC loans may be eligible for payments for past abuse

(DES MOINES, Iowa)  Attorney General Tom Miller today announced a $470 million joint state-federal settlement with mortgage lender and servicer HSBC Bank USA NA and its affiliates to address mortgage origination, servicing, and foreclosure abuses.

The settlement provides direct payments to Iowa borrowers for past foreclosure abuses, loan modifications and other relief for borrowers in need of assistance, rigorous mortgage servicing standards, and grants oversight authority to an independent monitor.

The settlement includes 49 states plus the District of Columbia, the U.S. Department of Justice, the U.S. Department of Housing and Urban Development, and the Consumer Financial Protection Bureau.

"This agreement not only provides relief to hundreds of Iowa borrowers affected by HSBC's past practices, it puts in place protections for current and future Iowa homeowners through tough mortgage servicing standards,” Miller said. “For years state attorneys general and our federal partners have worked together to hold mortgage servicers responsible for their past conduct. We’re doing that here through this settlement and we’ll continue to address bad conduct in the future.”

HSBC Agreement Closely Mirrors National Mortgage Settlement
The agreement’s mortgage servicing terms are similar to those required by the 2012 National Mortgage Settlement (NMS). That joint state-federal settlement with the five largest national mortgage servicers provided borrowers nationwide with more than $50 billion in direct relief, created new servicing standards, and implemented independent oversight.

A subsequent state-federal agreement with SunTrust Mortgage Inc. worth nearly $1 billion was announced in June of 2014.

Loan Modifications
The HSBC agreement requires the company to provide certain Iowa borrowers with loan modifications or other relief. 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.

Payments to Borrowers
Approximately 638 eligible Iowa 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 payment amounts will depend on how many borrowers file claims.

Later this year, a settlement administrator will contact eligible borrowers by mail about how to qualify for payments.

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.

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.

Independent Monitor
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.

Additional Terms
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 wrongful securitization conduct that is the focus of the Residential Mortgage-Backed Securities Working Group. Additionally, the agreement does not prevent any action by individual borrowers who wish to bring their own lawsuits.

The agreement will be filed as a consent judgment in the U.S. District Court for the District of Columbia.

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Court Documents:
Complaint
Consent Judgment
Consent Judgment Exhibit A
Consent Judgment Exhibit B
Consent Judgment Exhibit C
Consent Judgment Exhibit D
Consent Judgment Exhibit E
Consent Judgment Exhibit E-1
Consent Judgment Exhibit F
Consent Judgment Exhibit G
Consent Judgment Exhibit H
Consent Judgment Exhibit I

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