Restitution to Hoosiers could exceed $2M, impact at least 2,800 Indiana borrowers 

INDIANAPOLIS, Ind. – Indiana Attorney General Greg Zoeller today announced Indiana’s participation in a $470 million joint state-federal settlement with mortgage lender and servicer HSBC to address mortgage servicing and foreclosure abuses during the financial crisis.

There were 2,830 eligible Indiana borrowers whose loans were serviced by HSBC and who lost their homes to foreclosure from Jan. 1, 2008 through Dec. 31, 2012 and encountered servicing abuses who will be eligible for payments out of the $59.3 million fund set aside for restitution nationwide. If all potential claims are submitted, total payments to Hoosiers harmed by HSBC’s conduct could exceed $2 million.

In addition to direct payments to borrowers in Indiana and other states for HSBC’s past foreclosure abuses, the settlement also provides loan modification and other relief for borrowers in need of assistance and requires HSBC to comply with more rigorous mortgage servicing standards in the future.

Government entities participating in the settlement include Indiana and 49 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 U.S. Consumer Financial Protection Bureau (CFPB).

“During the worst of the financial crisis, Hoosier borrowers struggling to stay afloat and keep their homes all too often faced illegal abuses from lenders and mortgage servicers,” Zoeller said. “Today’s settlement will hold HSBC accountable for its past abusive practices and provide monetary relief to those who experienced the most harm.”

Payments to borrowers and loan modification

Indiana borrowers eligible for restitution will be contacted through the mail from the HSBC settlement administrator about how to qualify for payments. The borrower payment amount will depend on how many borrowers ultimately file claims.

Zoeller said his office will alert the public again when these mailings go out and will be available to answer any questions at that time.

The HSBC agreement also requires the company to provide certain Indiana borrowers with loan modifications or other relief. The modification process, which HSBC chooses through an extensive list of options, can include principal reduction 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.

Mortgage Servicing Standards

The settlement requires HSBC to substantially reform the ways in which it services mortgage loans, handles foreclosures and ensures the accuracy of information provided in federal bankruptcy court.

The terms will prohibit 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 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.

HSBC Agreement Closely Mirrors National Mortgage Settlement

The agreement’s mortgage servicing terms largely mirror the 2012 National Mortgage Settlement (NMS) reached in February 2012 between the federal government, 49 state attorneys general, including Indiana, 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. worth nearly $1 billion was announced in June 2014.

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.

“Unwinding the damage caused by unethical practices in the mortgage lending and mortgage servicing industry has taken several years of persistent effort by my office and our state AG colleagues in other states; and we hope that through these enforcement actions, vulnerable consumers will be less likely to be exploited in the future,” Zoeller added.

Struggling homeowners can seek free legal advice from the Indiana Foreclosure Prevention Network at www.877gethope.com or from Indiana Legal Services, which recently received a grant from the AG’s Office to support its foreclosure prevention services and debt counseling programs.

Zoeller thanked Deputy Attorneys General Tom Irons and Justin Hazlett for their work on this case.