HSBC settles U.S. fraud charges over foreclosure fees

Tue Jul 1, 2014 1:57pm EDT
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By Nate Raymond and Jonathan Stempel

NEW YORK (Reuters) - HSBC Holdings Plc (HSBA.L: Quote) agreed to pay $10 million to settle U.S. government charges that it defrauded taxpayers by submitting inflated bills to process residential foreclosures.

The civil settlement announced Tuesday is the first to result from an investigation by U.S. Attorney Preet Bharara in Manhattan into whether mortgage servicers overcharged the government on foreclosures on federally-backed home loans.

According to settlement papers, HSBC admitted and accepted responsibility for having failed in 2009 and 2010 to properly police foreclosure-related fees charged by outside lawyers and other service providers.

HSBC would submit inflated fees to the Federal Housing Administration, which is part of the Department of Housing and Urban Development, and government-controlled mortgage company Fannie Mae FNMA.OB for reimbursement, the papers show.

The British lender's inadequate oversight led to millions of dollars of losses for the FHA and Fannie Mae, Bharara said.

"Their lack of controls showed gross neglect and an abject failure to serve their customers, FHA and Fannie Mae, and therefore the taxpayers," Michael Stephens, acting inspector general at the Federal Housing Finance Agency, which oversees Fannie Mae, said in a statement.

HSBC spokesman Rob Sherman said the bank is pleased to settle. "Since 2010, we have taken steps to enhance oversight of foreclosure law firms, and put in place a robust law firm management and oversight program even before we received notice of this particular action," he said.

The accord resolves claims under a federal whistleblower law known as the False Claims Act. The identity of the whistleblower could not immediately be determined.   Continued...

The HSBC building is pictured in Mexico City, December 11, 2012. HSBC Holdings Plc has agreed to pay $1.92 billion (1.2 billion pounds) to settle a multi-year U.S. criminal probe into money-laundering lapses at the British lender, the largest penalty ever paid by a bank. HSBC admitted to a breakdown of controls and apologised in a statement on Tuesday announcing it had reached a deferred-prosecution agreement with the U.S. Department of Justice, as was first reported by Reuters last week. REUTERS/Edgard Garrido (MEXICO - Tags: BUSINESS CRIME LAW SOCIETY) - RTR3BGQZ