by Eric Tucker
Banking giant HSBC has reached a $470 million settlement with the federal government and nearly all states over mortgage lending and foreclosure abuses that officials say contributed to the country's economic meltdown, the Justice Department announced Friday.
The agreement requires the bank to pay $100 million and to provide an additional $370 million in consumer relief to borrowers and homeowners, including reducing mortgage interests rates as well as the principal on mortgages for homeowners who are at risk of default.
The deal also requires the bank to improve standards for how it services loans and handles foreclosures.
Officials say those changes are intended to discourage past banking practices, such as robosigning and poor-quality loans, that played a part in the financial crisis starting in 2007 in which millions of Americans lost their homes to foreclosure.
"This settlement illustrates the department's continuing commitment to ensure responsible mortgage servicing," Benjamin Mizer, head of the Justice Department's Civil Division, said in a statement. "The agreement is part of our ongoing effort to address root causes of the financial crisis."
The settlement involves the departments of Justice and Housing and Urban Development and the Consumer Financial Protection Bureau. Attorneys general from 49 states plus the District of Columbia signed on.
The $100 million payment will go to the federal government and to an escrow fund administered by the states to make payments to borrowers who lost their homes to foreclosure between 2008 and 2012. The $370 million in relief to homeowners already is flowing, the Justice Department said.
An independent monitor will also be appointed to oversee the bank's compliance with the settlement terms.
The civil settlement includes no criminal penalties, though the Justice Department says the state and federal government still have the option of pursuing criminal enforcement.
The Associated Press