NY AG FILES SUIT AGAINST HSBC BANK USA, HSBC MORTGAGE CORP.

(The following is a reformatted version of a press release
issued by the Office of New York Attorney General Eric T.
Schneiderman and received via electronic mail. The release was
confirmed by the sender.) 
June 4, 2013 
A.G. SCHNEIDERMAN SUES HSBC FOR HOLDING HUNDREDS OF STRUGGLING
HOMEOWNERS IN LEGAL LIMBO 
Suit Alleges That By Failing To Follow New York Law, HSBC Has
Trapped Hundreds Of New Yorkers Facing Foreclosure In The
“Shadow Docket” 
Schneiderman: The Law Is Clear And I Will Prosecute Any Lender
That Denies New York Homeowners Their Legally Mandated Right To
Negotiate Alternatives To Foreclosure 
BUFFALO -- Attorney General Eric T. Schneider­­man today filed a
lawsuit against HSBC Bank USA and HSBC Mortgage Corporation
(USA) for failing to follow state law related to foreclosure
actions, putting homeowners at greater risk of losing their
homes. Under state law, residential mortgage lenders, servicers
and their agents who sue to foreclose on a homeowner are
required to file a “Request for Judicial Intervention” (RJI)
when they file their proof of service with the county clerk. The
process mandates that the lender then attend a settlement
conference within 60 days. The purpose of this court-supervised
conference is to provide an opportunity for borrowers to
negotiate alternatives to foreclosure, including loan
modifications that make mortgage payments more affordable, with
the intent that they avoid losing their homes. 
Across New York, thousands of foreclosure cases are languishing
for months, even years, because financial institutions delay
filing the paperwork that triggers the settlement conference.
The subsequent backlog of cases is often referred to as the
“shadow docket,” and has become a major burden on homeowners and
the judicial system. According to one report, the Office of
Court Administration estimates that 25,000 families are trapped
in the shadow docket. 
“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,” said Attorney General
Schneiderman. “For homeowners facing foreclosure, time is their
greatest enemy. 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. I am committed to doing everything I can to stand up for
New Yorkers who are trapped in the ’shadow docket’ and denied
their right to fight for their homes.” 
An investigation conducted by Attorney General Schneiderman
showed that HSBC bank and HSBC Mortgage Corporate repeatedly
failed to timely file the RJI in hundreds of foreclosure cases
against New York homeowners, increasing the risk that those
homeowners would lose their homes. A sampling of HSBC
foreclosure filings from four counties -- Erie, Monroe, Suffolk
and Bronx -- identified close to 300 instances where HSBC failed
to file the RJI with the proof of service. In some of those
cases, homeowners waited for over two years for HSBC to file the
RJI. All the while, HSBC continued to charge interest and assess
fees and penalties, adding thousands of dollars to what the
homeowner owed. Those additional charges put homeowners at
greater risk that they would lose their homes because, as a
result, they may not qualify for a loan modification. 
Rebecca Karm, an Erie County resident fighting foreclosure after
suffering from medical issues and losing her job, waited
hundreds of days for a settlement conference, at a cost of
thousands of dollars. HSBC filed the proof of service on Nov.
12, 2010, but failed to file the RJI until June 8, 2012.
According to an affirmation provided by the Western New York Law
Center, the fees accrued during those 547 days would add
approximately $23,000 to Ms. Karm’s principal balance if she
were offered a permanent loan modification on the day the
affirmation was submitted. 
“HSBC needs to be held accountable for flouting a state law
designed to help people keep their homes, and I would like to
commend Attorney General Eric Schneiderman for standing up for
New Yorkers against this banking giant,” said Buffalo
Comptroller Mark J.F. Schroeder. “Foreclosures are a major
problem in Buffalo, and banks should be trying to fix the
situation, not make it worse.” 
“New York State has gone to extraordinary lengths to afford
homeowners protections of the courts when their homes are being
foreclosed upon,” said Joseph Kelemen, Executive Director of the
Buffalo-based Western New York Law Center. “When banks,
servicers, and other entities foreclosing on homes start a
lawsuit and then delay filing the necessary papers to get the
case in front of a judge, homeowners are denied the protections
they are entitled to under the law and are placed at greater
risk of losing their homes. We applaud the efforts of Attorney
General Schneiderman to restore integrity to the judicial
foreclosure process.” 
Attorney General Schneiderman filed a lawsuit in New York
Supreme Court seeking to compel HSBC to file the RJI immediately
in all cases in which it has filed a proof of service, and to
file an RJI simultaneously with proof of service in all future
cases. In cases where HSBC has already failed to file the RJI
with proof of service on the homeowner, the suit also seeks to
compel HSBC to take the following steps to protect New York
homeowners: 
·         Prepare an accounting of interest charges, penalties
and fees (e.g. late fees, inspection fees, attorney’s fees,
broker reports) ­that accrued beginning 60 days after the filing
of proof of service on the homeowner; 
·         Toll and waive all accrued interest charges, fees and
penalties that accrued, or will accrue, beginning 60 days after
the filing of proof of service on the homeowner; 
·         Grant restitution for interest charges, fees and
penalties paid by the homeowner that accrued beginning 60 days
after the filing of proof of service on the homeowner; and 
·         Grant damages to homeowners injured by HSBC’s illegal
practices. 
Today’s lawsuit was brought against HSBC; however, Attorney
General Schneiderman is committed to bringing similar actions
against other mortgage lenders who hold borrowers in the shadow
docket in defiance of state law. 
“Although identifying these cases takes significant resources,
my office will continue to bring these types of cases until
every homeowner in the shadow docket receives the relief they
are legally entitled to,” added Schneiderman. 
This case is being handled by Assistant Attorney General James
M. Morrissey, under the supervision of Assistant Attorney
General In-Charge Michael J. Russo and Executive Deputy Attorney
General Martin J. Mack. 
Attorney General Schneiderman’s lawsuit against HSBC is part of
his ongoing effort to bring much-needed protections to
homeowners facing foreclosure. He proposed a measure that will
require plaintiff attorneys to file the proof of personal
service, and proof that their client has the right to foreclose
on the loan, earlier in the foreclosure process (A. 5582), and
legislation that would impose criminal penalties on residential
mortgage lenders, servicers and their agents who intentionally
engage in fraudulent or deceptive conduct in the preparation,
execution or filing of false foreclosure documents (A.7395).
Both bills have passed in the Assembly and await Senate
approval. 
For more information on Attorney General Schneiderman’s efforts
to support New York families caught in the foreclosure crisis,
visit www.AGHomeHelp.com. 
New York City Press Office / 212-416-8060
Albany Press Office / 518-473-5525
nyag.pressoffice@ag.ny.gov
Twitter: @AGSchneiderman 
(bjh) NY 
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