Kentucky part of $470M settlement with mortgage lender

More than 1,400 Kentucky borrowers eligible for $59 million in payments from national fund

FRANKFORT, Ky. (Feb. 5, 2016) — Attorney General Andy Beshear today announced a $470 million joint state-federal settlement with mortgage lender and servicer HSBC to address mortgage origination, servicing and foreclosure abuses.

The settlement will provide direct payments to approximately 1,407 eligible Kentucky borrowers whose loans were serviced by HSBC and who lost their home to foreclosure from January 1, 2008, through December 31, 2012, and encountered servicing abuse.

Kentucky borrowers will be eligible for a payment from the national $59.3 million fund for payments to borrowers. The borrower payment amount will depend on how many borrowers file claims, Beshear said, adding that eligible borrowers will be contacted by a third-party administrator about how to qualify for payments.

Besides the $59.3 fund for borrowers, the settlement includes $40.5 million to be paid to the settling federal parties and $370 million in further consumer relief. The settlement includes Kentucky and 48 other states, the District of Columbia, the U.S. Department of Justice (DOJ), the U.S. Department of Housing and Urban Development (HUD), and the Consumer Financial Protection Bureau (CFPB).

The agreement’s mortgage servicing terms largely mirror the 2012 National Mortgage Settlement (NMS) reached in February of 2012 between the federal government, 49 state attorneys general, including Kentucky, and the five largest national mortgage servicers. That agreement provided consumers nationwide with more than $50 billion in direct relief, created new servicing standards and implemented independent oversight.

A subsequent state-federal agreement with SunTrust Mortgage Inc. worth nearly $1 billion was announced in June of 2014.

The HSBC agreement requires the company to provide certain Kentucky borrowers with loan modifications or other relief, and the settlement requires HSBC to substantially change how it services mortgage loans, handles foreclosures and ensures the accuracy of information provided in federal bankruptcy court.

The terms will prevent past foreclosure abuses, such as robo-signing, improper documentation and lost paperwork.

The settlement’s consumer protections and standards include:

  • Making foreclosure a last resort by first requiring HSBC to evaluate homeowners for other loss mitigation options
  • Restricting foreclosure while the homeowner is being considered for a loan modification;
  • Procedures and timelines for reviewing loan modification applications
  • Giving homeowners the right to appeal denials
  • Requiring a single point of contact for borrowers seeking information about their loans and maintaining adequate staff to handle calls

The National Mortgage Settlement’s independent monitor, Joseph A. Smith Jr., will oversee HSBC agreement compliance for one year. Smith will oversee implementation of the servicing standards required by the agreement.