A state-federal settlement with HSBC will provide direct payments to Delaware borrowers.
Attorney General Matt Denn joined the federal government and other state attorneys general in announcing the settlement with HSBC to address mortgage origination, servicing, and foreclosure abuses.
The settlement includes Delaware and 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 Consumer Financial Protection Bureau (CFPB).
The settlement differs from cases that awarded money to states. Delaware tapped a portion of one settlement to plug a hole in the state budget, a move that led to a lawsuit. Denn is seeking money from another suit to be used to aid troubled communities.
“This settlement provides relief to previous and current Delaware borrowers and compels HSBC to treat its borrowers much more fairly in the future,” Attorney General Matt Denn said. “This company will have to change its practices and raise its standards for how it treats consumers, as other companies have through others settlements in recent years. The irresponsible practices of the mortgage industry that led to the housing crisis and recession are continuing to change as a result of actions like these.”
The HSBC agreement requires the company to provide eligible Delaware 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.
About 240 eligible Delaware 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 payment from a 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 about how to qualify for payments.
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.
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.
