Thousands of Tennessee borrowers are eligible for cash payments or loan modifications following a $470 million joint state-federal settlement with mortgage lender and servicer HSBC that addresses mortgage origination, servicing, and foreclosure abuses after Attorney General Herbert H. Slatery III announced the deal last week.
The settlement with Tennessee and 48 other states, the District of Columbia, U.S. Department of Justice, the U.S. Department of Housing and Urban Development, and the Consumer Financial Protection Bureau, provides direct payments, loan modifications, as well as other relief for Tennessee borrowers. In addition, the settlement implements rigorous mortgage servicing standards and grants oversight authority to an independent monitor.
“This settlement holds HSBC accountable for its past practices, and it provides relief to Tennessee borrowers,” Attorney General Slatery said. “The tough servicing standards will compel HSBC to treat its borrowers much more fairly in the future.”
The HSBC settlement requires the company to provide certain Tennessee borrowers with loan modifications or other relief. The modifications may include principal reductions and refinancing for underwater mortgages. HSBC decides how many loans and which loans to modify, but must meet certain minimum targets.
Approximately 2,600 Tennessee borrowers are eligible for a payment from the national $59.3 million fund for payments to borrowers. Eligible borrowers are those whose loans were serviced by HSBC and who lost their home to foreclosure from Jan. 1, 2008 through Dec. 31, 2012 and encountered servicing abuse. The borrower payment amount will depend on how many borrowers file claims. Eligible borrowers will be contacted about how to qualify for payments.
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 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; and 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 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.
In addition, 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. Additionally, the settlement does not prevent any action by individual borrowers who wish to bring their own lawsuits. The settlement will be filed as a consent judgment in the U.S. District Court for the District of Columbia.
The settlement’s mortgage servicing terms mirrors the 2012 National Mortgage Settlement between the federal government, 49 state attorneys general (including Tennessee), and the five largest national mortgage servicers. That agreement has provided Tennessee with over $200 million in benefits, including loan modifications that have helped homeowners avoid foreclosure by restructuring their mortgage payments. Similar state-federal settlements were subsequently reached with Ocwen in 2013 and with SunTrust in 2014.
For loans serviced by HSBC Bank USA, borrowers should call (866) 435-7085. For loans serviced by HSBC Mortgage Services, Household Finance, or Beneficial, borrowers should call (800) 333-7023. A settlement administrator will contact qualified borrowers associated with foreclosed loans later this year regarding cash payments. More information will be made available as the settlement programs are implemented. For more information about free foreclosure prevention counselors in Tennessee, visit thda.org/homeowners/foreclosure-prevention, or call the State of Tennessee’s free Mortgage Assistance Hotline at (855) 876-7283 Monday through Friday from 10 a.m. to 6 p.m.
Source: Office of Attorney General Herbert H. Slatery III