The Justice Department announced on Friday that HSBC has agreed to pay $470 million to settle the mortgage and foreclosure abuses that have rendered many people homeless and, overall, added to the slowing economy.
The complaints against HSBC's banking practices, like robosigning and bad loan structure, culminated into mass anger, in the face of the financial crisis which saw tens of thousands of Americans losing their homes to foreclosure. In 2013, the bank had apologized for the wrongful doings of its US branch and entered into an agreement with Federal Reserve and the Office of the Comptroller of the Currency to pay $249 million, according to US News. The institution had agreed that they should have dealt with the matter differently and not driven so many people out of their homes.
Now, the current settlement that has reached $470 million also requires the bank meet certain standards for their customers, especially in the areas of loan servicing and foreclosure handling. Virginia, along with 48 other states, took help of establishments like the District of Columbia, the U.S. Department of Justice, the U.S. Department of Housing and Urban Development and the Consumer Financial Protection Bureau, to finally arrive at this settlement.
"Mortgage servicers have a responsibility to help struggling borrowers remain in their home, not to push them into foreclosure," said Helen Kanovsky, general counsel of the U.S. Department of Housing and Urban Development. "This agreement is another example of how multiple agencies in the federal government and state attorneys general across the country are working to make sure the mortgage industry treats consumers fairly."
More than 3100 borrowers in Virginia are to receive $2.42 million as a direct payment from the bank while others are entitled to receive loan modifications and other reliefs as per the agreement. According to The Hill, from the $470 million, $59.3 million is meant for the escrow fund set up by the 49 states that took action against HSBC's ways of arm-twisting people out of their homes in 2008-2012. Another $200 million will cover the investigation costs incurred by the state attorneys and a $40.5 million will be provided to pay the federal fines.
"This settlement illustrates the department's continuing commitment to ensure responsible mortgage servicing," Benjamin Mizer stated, head of the Justice Department's Civil Division, as per Richmond Times. "The agreement is part of our ongoing effort to address root causes of the financial crisis."
Additionally, an independent body will be appointed to monitor the bank's compliance with the revised standards of service and terms of settlement. HSBC is not the first financial institution to land itself in this situation through unjust practices. The 2012 National Mortgage Settlement is a prime example where five of the world's leading mortgage servicers paid more than $50 billion to the abused mortgage loan borrowers.
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