HSBC Holdings Inc has agreed to a US$249 million accord to settle claims of improper US foreclosures, joining 12 other mortgage servicers in a deal that now exceeds US$9 billion, according to banking regulators.
US units of HSBC signed a deal with the US Federal Reserve and the US Office of the Comptroller of the Currency (OCC) to pay US$96 million in cash to 112,000 US borrowers it foreclosed on in 2009 and 2010 and provide US$153 million in other mortgage help, according to a statement by the Fed and OCC on Friday.
HSBC was among lenders accused of rushing home foreclosures by using flawed documents.
Ten of the largest US mortgage servicers, including JPMorgan Chase & Co, Bank of America Corp and Citigroup Inc, agreed to an US$8.5 billion settlement with the Fed and the OCC on Jan. 7.
This week, Goldman Sachs Group Inc and Morgan Stanley joined the deal with the Fed, ending their faulty foreclosure history with a US$557 million package of cash and other assistance.
After a US housing-market collapse started the worst US financial crisis since the Great Depression, mortgage servicers were accused of engaging in improper foreclosure practices.
In almost two years since regulators ordered the largest US servicers to hire independent consultants to conduct case-by-case reviews of foreclosures, none of the borrowers has been compensated.
“We are pleased to have reached this agreement, in line with 12 others in the industry who have arrived at similar settlements, and believe it is a positive development that will benefit homeowners,” HSBC US spokesman Neil Brazil said in a statement.
The bank will record a pretax charge of US$96 million in the fourth quarter of last year and expects its existing reserves will absorb the US$153 million in other aid “with no significant incremental financial impact,” Brazil said.
Last month, London-based HSBC agreed to pay US$1.9 billion to close a global money-laundering probe by the US Department of Justice and banking regulators in the US and UK.
It struck this foreclosure deal with the OCC and Fed because HSBC Bank USA is regulated by the OCC while the Fed regulates HSBC Finance Corp, which absorbed Household International Inc in 2004.
The new settlement ends case-by-case foreclosure reviews and provides for borrowers who went through foreclosures under HSBC or the other servicers to automatically receive some level of cash compensation based on banks’ review of the level of harm each may have suffered.
Cash payments will be as high as US$125,000 to borrowers hurt the most, regulators have said.
Of the US$9.3 billion in settlements, Bank of America is paying the most at US$2.9 billion, followed by Wells Fargo & Co and JPMorgan, both at US$2 billion, an OCC document said.
Almost 4.2 million borrowers will receive compensation, with an average payout of US$867.