HSBC Sued by New York Over Alleged Foreclosure Violations
By David McLaughlin & Chris Dolmetsch - Jun 5, 2013 12:01 AM ET
HSBC Holdings Plc (HSBA), Europe’s largest bank, was accused in a suit by New York Attorney General Eric Schneiderman of violating the state’s foreclosure law and putting homeowners at increased risk of losing their property.
A state investigation found that HSBC failed to give homeowners a chance to negotiate loan modifications, as required by law, leaving them languishing in foreclosure proceedings, according Schneiderman, who sued HSBC yesterday in New York state Supreme Court in Buffalo.
New York Attorney General Eric Schneiderman speaks at a news conference in Buffalo, New York, on June 4, 2013. A state investigation found that HSBC Holdings Plc has left homeowners languishing in foreclosure by failing to meet requirements for giving them an opportunity to negotiate loan modifications. Photographer: Brendan Bannon/Bloomberg
“Companies like HSBC are brazenly ignoring state law, leaving homeowners across New York stuck in a legal limbo where they can’t even get the legally required settlement conference that could help them keep their homes,” the attorney general said.
The suit underscores Schneiderman’s continuing scrutiny of banks’ foreclosure practices after all but one of the nation’s attorneys general reached a $25 billion settlement last year with five mortgage servicers including Bank of America Corp. andWells Fargo & Co. (WFC) HSBC wasn’t part of that accord.
Schneiderman said in May he was prepared to sue Bank of America and Wells Fargo for allegedly violating terms of the nationwide settlement, which set requirements for servicing mortgages and provided financial relief for homeowners. Schneiderman said the lenders have failed to comply with standards for processing applications from homeowners for loan modifications.
“HSBC is committed to compliance with all applicable laws, which includes those related to foreclosure,” HSBC said in a statement. “We will respond appropriately to the state AG in this matter.”
The HSBC case is based on New York’s law governing foreclosures. It requires court-supervised settlement conferences where homeowners can try to negotiate alternatives to foreclosure such as a loan modification that would lower monthly payments.
Lenders and servicers who sue to foreclose in New York must file a request for judicial intervention at the same time they file proof of service on the foreclosure action. The process requires a settlement conference within 60 days.
The state found that HSBC failed to file the required paperwork in hundreds of foreclosure cases in New York, putting off the request for judicial intervention in some instances for more than two years, Schneiderman said. A sample of foreclosure filings in Bronx, Erie, Monroe and Suffolk counties found almost 300 instances where HSBC failed to file the paperwork in time, according to Schneiderman.
HSBC continued to charge interest and fees, increasing the amount owed by homeowners and reducing the likelihood they would qualify for a loan modification, according to the state.
Schneiderman cited as an example Rebecca Karm, an Erie County resident who lost her job and is suffering from health issues. Karm waited more than 500 days for a settlement conference after HSBC filed proof of service in November 2010 while failing to submit a request for judicial intervention until June 2012. That added about $23,000 in accrued fees to Karm’s principal balance, the attorney general’s office said.
Schneiderman is seeking restitution and damages for homeowners “injured by HSBC’s illegal practices” and to force HSBC to file the required papers in pending foreclosure actions and future cases.
In cases where HSBC hasn’t filed requests for judicial intervention, he asked the court to order the bank to waive all interest charges, penalties and fees that accrued 60 days after proof of service was filed and to pay restitution.
“For homeowners facing foreclosure, time is their greatest enemy,” Schneiderman said. “Every day spent waiting for a settlement conference is a day that the lender piles on additional interest, fees and penalties and the homeowner falls further behind.”
The case is New York v. HSBC Bank USA, 1660/2013, New York State Supreme Court, Erie County (Buffalo).
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