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Home | Daily Dose | HSBC to Pay $10M to Settle Claims over Foreclosure Fees
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HSBC to Pay $10M to Settle Claims over Foreclosure Fees

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HSBC has reached a settlement with the federal government related to its failure, prior to 2011, to oversee the reasonableness of the third party foreclosure-related fees that it submitted to the Federal Housing Administration (FHA) and to Fannie Mae for reimbursement. The servicer will pay a $10 million penalty.

As part of the settlement, HSBC admitted to failing to create systems to review the fees charged by third party providers that were then submitted to Fannie Mae and FHA without the oversight and review required by law, costing the taxpayers unspecified millions of dollars.

In order to obtain FHA approval to service FHA-insured loans, servicers are required to submit annual certifications stating that they adhered to all FHA handbooks, regulations and policies over the course of the preceding year. One of the policy requirements is that that servicers must create and maintain a quality control program to review all aspects of servicing operations.

Third party foreclosure related fees are included in the operations that must be monitored and the servicer is required to certify that all fees are "reasonable, customary, and necessary." For a period of years, HSBC routinely submitted the required certifications, even though no such program had been put in place.

"HSBC failed to live up to its legal obligation to monitor and review fees and expenses it was submitting to FHA and Fannie Mae for reimbursement, and in the process, cost the public millions of dollars," U.S. Attorney Preet Bharara said. "With today's settlement, HSBC publicly admits to its failures and agrees to pay the Government $10 million. Civil actions like these serve as an important tool that our Office can and will continue to use in holding financial institutions responsible for misconduct."

FHFA Acting Inspector General Michael P. Stephens added, "HSBC had a responsibility, as a servicer, to have controls in place which ensured the fees and charges submitted to Fannie Mae were appropriate and reasonable. Their lack of controls showed gross neglect and an abject failure to serve their customers, FHA and Fannie Mae, and therefore the taxpayers. We are proud to have worked with our partners on this case."

The agreement required HSBC to affirm that it will follow all requirements for servicers of mortgage loans insured by FHA in the future.

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