Arizona homeowners will receive approximately $2.6 million dollars in direct payments and more than $4 million in loan modifications as a result of a national settlement with mortgage servicer HSBC. The repayment is part of a $470 million joint state-federal settlement due to abusive foreclosure and loan servicing practices.
“Arizona homeowners on the verge of losing their homes shouldn’t have to worry about mortgage companies taking advantage of them,” said Attorney General Mark Brnovich. “This settlement holds HSBC accountable for its abusive practices and ensures HSBC will treat its borrowers more fairly in the future.”
The settlement addresses abuses involving mortgage origination, servicing, and foreclosure. It requires HSBC to issue direct payments, loan modifications, and other relief for borrowers in need of assistance. HSBC must comply with rigorous mortgage servicing standards and an independent monitor will ensure HSBC complies with the agreement. The settlement includes Arizona 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).
HSBC Agreement Closely Mirrors National Mortgage Settlement
The agreement’s mortgage servicing terms largely mirrors the 2012 National Mortgage Settlement (NMS) (link is external) reached in February 2012 between the federal government, 49 state attorneys general, including Arizona, and the five largest national mortgage servicers. That agreement provided consumers 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. (link is external) worth nearly $1 billion was announced in June 2014.
The HSBC agreement requires the company to provide certain Arizona borrowers with loan modifications or other relief. Arizona homeowners also could receive more than $4 million in home loan modifications. 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 3,335 eligible Arizona 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 direct payment from the 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.
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.
The National Mortgage Settlement’s independent monitor, Joseph A. Smith Jr., will oversee HSBC agreement compliance for one year. Smith will oversee implementation of the servicing standards required by the agreement; impose penalties of up to $1 million per violation (or up to $5 million for certain repeat violations); and issue public reports that identify whether HSBC complied or fell short of the standards imposed by the settlement.
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. Please check for future updates to the Settlement website at www.NationalMortgageSettlement.com (link is external) for further information regarding the Settlement and copies of the documents filed with the Court.
This case is being handled by Assistant Attorney General Jeremy Shorbe.
If you believe you have been a victim of consumer fraud, please contact the Attorney General’s Office in Tucson at (520) 628-6504, in Phoenix at (602) 542-5763, or outside the Phoenix and Tucson metro areas at 1 (800) 352-8431. Consumers can also file complaints online by visiting the Arizona Attorney General’s website at https://www.azag.gov/complaints.