HSBC Holdings Plc, Europe’s largest bank, was accused in a suit by New York Attorney General Eric Schneiderman of violating the state’s foreclosure law and putting homeowners at increased risk of losing their property.
A state investigation found that HSBC failed to give homeowners the legally required chance to negotiate loan modifications, leaving them languishing in foreclosure proceedings, according to Schneiderman, who sued HSBC yesterday in New York state Supreme Court in Buffalo.
“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,” the attorney general said.
The suit underscores Schneiderman’s continuing scrutiny of banks’ foreclosure practices after all but one of the nation’s attorneys general reached a $25 billion settlement last year with five mortgage servicers including Bank of America Corp. and Wells Fargo & Co. HSBC wasn’t part of that accord.
Schneiderman said in May he was prepared to sue Bank of America and Wells Fargo for allegedly violating terms of the nationwide settlement, which set requirements for servicing mortgages and provided financial relief for homeowners. Schneiderman said the lenders have failed to comply with standards for processing applications from homeowners for loan modifications.
“HSBC is committed to compliance with all applicable laws, which includes those related to foreclosure,” HSBC said in a statement. “We will respond appropriately to the state AG in this matter.”
New York’s law governing foreclosures requires court-supervised settlement conferences where homeowners can try to work out alternatives to foreclosure such as loan modifications that cut monthly payments.
Lenders and servicers who sue to foreclose in New York must file a request for judicial intervention at the same time they file proof of service on the foreclosure action. A settlement conference is supposed to take place within 60 days.
The attorney general’s office doesn’t believe HSBC is “just some rogue actor” violating state foreclosure law, Schneiderman said today at a press conference.
“If other banks are engaged in that conduct and refuse to correct themselves, then other cases will come,” he said.
The state found HSBC failed to file the required paperwork in hundreds of foreclosure cases in New York, putting off the request for judicial intervention in some instances for more than two years, Schneiderman said. A sample of foreclosure filings in Bronx, Erie, Monroe and Suffolk counties found almost 300 cases in which HSBC failed to comply with the filing deadline, according to Schneiderman.
HSBC continued to charge interest and fees, increasing the homeowners’ balance on their mortgages and making it less likely they could qualify for a loan modification, according to the state.
Schneiderman cited as an example Rebecca Karm, an Erie County resident who lost her job and is suffering from health issues. Karm waited more than 500 days for a settlement conference after HSBC filed proof of service in November 2010 while failing to submit a request for judicial intervention until June 2012. That added about $23,000 in accrued fees to Karm’s principal balance, the attorney general’s office said.
Schneiderman is seeking damages for homeowners “injured by HSBC’s illegal practices” and to force HSBC to file the required papers in pending foreclosure actions and future cases.
In cases where HSBC hasn’t filed requests for judicial intervention, he asked the court to order the bank to waive all interest charges, penalties and fees that accrued 60 days after proof of service was filed and to pay restitution.
“For homeowners facing foreclosure, time is their greatest enemy,” Schneiderman said.
The case is New York v. HSBC Bank USA, 1660/2013, New York State Supreme Court, Erie County (Buffalo).