Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

HSBC settles U.S. fraud charges over foreclosure fees

Published 07/01/2014, 01:57 PM
Updated 07/01/2014, 10:30 AM
HSBC settles U.S. fraud charges over foreclosure fees

HSBC settles U.S. fraud charges over foreclosure fees

By Nate Raymond and Jonathan Stempel NEW YORK (Reuters) - HSBC Holdings Plc (L:HSBA) agreed to pay $10 million to settle U.S. government charges that it defrauded taxpayers by submitting inflated bills to process residential foreclosures.

The civil settlement announced Tuesday is the first to result from an investigation by U.S. Attorney Preet Bharara in Manhattan into whether mortgage servicers overcharged the government on foreclosures on federally-backed home loans.

According to settlement papers, HSBC admitted and accepted responsibility for having failed in 2009 and 2010 to properly police foreclosure-related fees charged by outside lawyers and other service providers.

HSBC would submit inflated fees to the Federal Housing Administration, which is part of the Department of Housing and Urban Development, and government-controlled mortgage company Fannie Mae (OB:FNMA) for reimbursement, the papers show.

The British lender's inadequate oversight led to millions of dollars of losses for the FHA and Fannie Mae, Bharara said.

"Their lack of controls showed gross neglect and an abject failure to serve their customers, FHA and Fannie Mae, and therefore the taxpayers," Michael Stephens, acting inspector general at the Federal Housing Finance Agency, which oversees Fannie Mae, said in a statement.

HSBC spokesman Rob Sherman said the bank is pleased to settle. "Since 2010, we have taken steps to enhance oversight of foreclosure law firms, and put in place a robust law firm management and oversight program even before we received notice of this particular action," he said.

The accord resolves claims under a federal whistleblower law known as the False Claims Act. The identity of the whistleblower could not immediately be determined.

A typical foreclosure can cost $1,000 to $3,000. Much of the sum goes toward legal fees, and other expenses can go toward court filing costs, mailings and title searches.

At least $6 trillion of loans overseen by large servicers in the United States from 2009 to 2012 were delinquent or in foreclosure, the trade publication Inside Mortgage Finance said.

Other companies have also received subpoenas from Bharara's office related to foreclosure fees charged to the FHA, Fannie Mae and Freddie Mac (OB:FMCC).

© Reuters. The HSBC building is pictured in Mexico City

Among the recipients are Banco Santander SA (MC:SAN), MetLife Inc (N:MET), PHH Corp (N:PHH), PNC Financial Services Group Inc (N:PNC) and Royal Bank of Scotland Group Plc's (L:RBS) Citizens Financial unit, according to regulatory filings. None immediately responded on Tuesday to requests for comment.

The case is U.S. v. HSBC Bank USA NA et al, U.S. District Court, Southern District of New York, No. 13-01467.

(Additional reporting by Aruna Viswanatha in Washington, D.C.; Editing by Grant McCool)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.