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From Banking and Finance Law Daily, February 8, 2016

Fed hits HSBC with $131M penalty for mortgage servicing violations

By Katalina M. Bianco, J.D.

The Federal Reserve Board has assessed a civil money penalty against HSBC North America Holdings, Inc. and HSBC Finance Corporation for deficiencies in residential mortgage loan servicing and foreclosure processing. The $131 million penalty is the maximum amount allowed, according to the Fed. The order of assessment, pursuant to the Federal Deposit Insurance Act, takes into consideration the circumstances of HSBC's unsafe and unsound practices and foreclosure activities.

The Fed’s penalty is assessed in conjunction with a $470 million settlement agreement entered into by HSBC, the Department of Justice Department of Housing and Urban Development, Consumer Financial Protection Bureau, 49 state attorneys general, and the District of Columbia. Oklahoma is the only state not a party to that consent order (See Banking and Finance Law Daily, Feb. 5, 2016).

Previous enforcement activity. The Fed previously entered a consent order against HSBC in April 2011, requiring the company to correct its servicing and foreclosure-related deficiencies. That action was among 14 corrective actions issued against Fed-supervised mortgage servicers or their parent holding companies for unsafe and unsound practices in residential mortgage loan servicing and foreclosure processing. The current penalty was issued in conjunction with the 2011 consent order. The Office of the Comptroller of the Currency also entered a consent order against HSBC in April 2011 based on the same mortgage servicing and foreclosure processing deficiencies determined by the Fed.

Satisfaction of penalty. The Fed’s penalty may be satisfied by providing borrower assistance or remediation in conjunction with the DOJ settlement, or by providing funding for nonprofit housing counseling organizations, according to the Fed. If HSBC does not satisfy the full penalty amount within two years, the remaining amount must be paid to the Treasury Department.

HSBC statement. HSBC issued a statement about the DOJ settlement and the Fed consent order. In its statement, HSBC said that in addition to civil money penalties, HSBC has agreed to adhere to the national mortgage servicing standards outlined in prior NMS agreements reached with other U.S. mortgage servicers. According to HSBC, the settlement will not cause HSBC to take any additional charges to income beyond those recorded in prior years.

Companies: HSBC Finance Corporation; HSBC North America Holdings, Inc.

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