New York State has sued HSBC Holdings Plc for ignoring a law designed to protect struggling homeowners from being thrown into foreclosure without getting a chance to renegotiate their mortgages. The lawsuit, filed by Attorney General Eric Schneiderman, accuses Europe’s largest bank of letting foreclosure cases languish by ignoring a state law intended to give homeowners a chance to negotiate loan modifications. General Schneiderman said such delays have trapped as many as 25,000 homeowners in a “shadow docket” of foreclosure cases backlogged as long as two and a half years, causing them to rack up thousands of dollars of needless interest, fees and penalties.
The lawsuit was filed in a New York state court in Buffalo. HSBC is accused of regularly ignoring a state law requiring lenders to file paperwork, known as a request for judicial intervention, which entitles homeowners to settlement conferences within 60 days to negotiate loan modifications. A sampling showed that since 2010 HSBC has been too slow to file required paperwork in 297 cases in the counties of The Bronx, Erie, Monroe and Suffolk, and that thousands of similar cases may exist in 58 other counties in the state. General Schneiderman said in a court filing: “HSBC’s business practices not only violate the law, but they make it more likely that homeowners will unnecessarily lose their homes.”
The Attorney General is still considering possible lawsuits against Bank of America Corp and Wells Fargo & Co for violating terms of a nationwide settlement over mortgage servicing abuses. General Schneiderman has accused the nation’s second- and fourth-largest banks of having failed to timely process modification applications. Wells Fargo is also the largest U.S. mortgage lender. The $25 billion settlement reached in February 2012 also covered Ally Financial Inc, Citigroup Inc and JPMorgan Chase & Co, but not HSBC. The Attorney General has not publicly suggested plans to sue those other lenders, but he has indicated that unnamed financial institutions may become targets. Apparently a decision there will depend on the outcome of the HSBC lawsuit. It appears this Attorney General means business and my unsolicited advice to the banks would be to comply with their agreements.
As of March 31st, HSBC Bank USA had $183.9 billion of assets, and operated more than 250 branches in 11 U.S. states and Washington, D.C., with about two-thirds of the branches in New York State. The Attorney General’s lawsuit seeks restitution for homeowners, a waiver of improper accrued charges and fees, other damages, and a requirement that HSBC file papers properly in the future. The case is New York v. HSBC Bank USA et al, in the New York State Supreme Court, Erie County.
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