HSBC to pay over $800 million for shoddy US mortgage practices

HSBC will be required to implement new standards aimed in part at preventing the foreclosure abuses of the past.
HSBC will be required to implement new standards aimed in part at preventing the foreclosure abuses of the past.PHOTO: BLOOMBERG

WASHINGTON (AFP) - British banking giant HSBC is to pay more than US$600 million (S$843 million) to US authorities for its abusive mortgage lending and foreclosure practices in the housing market, officials said Friday.

HSBC, Europe's biggest bank, will pay US$470 million to settle the allegations by the US government, 49 states and the District of Columbia, the Justice Department said in a statement.

"This agreement is the result of a coordinated effort between federal and state partners to hold HSBC accountable for abusive mortgage practices," said Stuart Delery, acting associate attorney general, in the statement.

Separately, the Federal Reserve announced it had fined HSBC US$131 million, the maximum allowable by law, for "deficiencies in residential mortgage loan servicing and foreclosure processing."

Under the settlement agreement, HSBC will pay US$370 million in consumer relief by July to help homeowners struggling with their mortgages. Part of the amount will be used to reduce the amount of principal owed by homeowners at risk of default.

The bank also will pay US$100 million, including US$59.3 million that will go into a fund run by the states to help borrowers who lost their homes to foreclosure between 2008 and 2012.

In addition, HSBC will be required to implement new standards aimed in part to prevent the foreclosure abuses of the past, including robo-signing, the practice of approving mortgage applications with minimal to no vetting.

Abusive lending practices were a key factor in the sub-prime crisis that led to the collapse of the US housing market in 2006, which in turn led to the 2008 financial crisis and global recession.

In 2012, five big US banks - JPMorgan Chase, Bank of America, Citigroup, Wells Fargo and Ally Financial - paid a combined US$25 billion to settle their alleged abusive mortgage and foreclosure dealings.