WASHINGTON (2/9/16)--Issues with mortgage originations and servicing, as well as foreclosure abuses, led to a $470 million settlement with HSBC and the U.S. Department of Justice, Department of Housing and Urban Development and Consumer Financial Protection Bureau, the agencies announced last week. Also included in the settlement are attorneys general from 49 states and the District of Columbia.

According to the agencies, the agreement resolves potential violations of civil law based on HSBC’s deficient mortgage loan origination and servicing activities. HSBC has agreed to provide more than $470 million in relief to consumers and payments to federal and state parties, and to be bound to mortgage servicing standards and be subject to independent monitoring of its compliance with the agreement.

Specifically, the settlement provides that:

• HSBC will pay $100 million: $40.5 million to be paid to the settling federal parties; $59.3 million to be paid into an escrow fund administered by the states to make payments to borrowers who lost their homes to foreclosure between 2008 and 2012; and $200,000 to be paid into an escrow fund to reimburse the state attorneys general for investigation costs;
   
• By July, HSBC will complete $370 million in creditable consumer relief directly to borrowers and homeowners in the form of reducing the principal on mortgages for borrowers who are at risk of default, reducing mortgage interest rates, forgiving forbearance and other forms of relief;
   
• HSBC will be required to implement standards for the servicing of mortgage loans, the handling of foreclosures and for ensuring the accuracy of information provided in federal bankruptcy court. These standards are designed to prevent foreclosure abuses of the past, such as robo-signing, improper documentation and lost paperwork.

The agreement will be filed as a consent judgment in the U.S. District Court for the District of Columbia. Compliance with the agreement will be overseen by an independent monitor.