A leading foreclosure defense attorney said a recent regulatory settlement with mortgage lender HSBC is only a slap on the wrist.
On Feb. 5, Illinois Attorney General Lisa Madigan announced a deal to resolve allegations that HSBC wronged borrowers through abusive mortgage origination, servicing and foreclosure practices. Madigan, 48 other state attorneys general and the federal government signed off on the agreement to provide $470 million to homeowners nationwide. Eligible homeowners in Illinois will get a share of $2 million in direct payments and $9 million in loan modifications. In a press release, Madigan said she has worked to hold banks and mortgage servicers accountable for abuses that affected many Illinois homeowners.
But Erica Minchella, founder and president of the Association of Foreclosure Defense Attorneys, said, although the settlement includes financial benefits for consumers, it does not do enough to punish banks for past abuses. She has 30 years of legal experience and has spent the last 8 years representing clients in foreclosure proceedings.
“I don’t think the punishment has nearly fit the crime,” Minchella said. “But we have to accept that there has to be some conclusion to what’s happened.”
Eileen Boyce, a spokesperson for the attorney general’s office, said how much each individual receives will depend on how many borrowers file claims. Minchella said the average benefit could be small if a large number of claims are filed.
“It will be pennies,” Minchella said. “But, something is better than nothing. Most defendants don’t expect anything anymore. Anything they get is to their benefit.”
In addition, many borrowers have already lost their homes and the settlement won’t make much of a difference unless they received a loan modification, Minchella said.
“It doesn’t undo the losses that were incurred by homeowners,” she said. “The real problem is the way the banks were able to proceed.”
The settlement also requires HSBC to change the way it services mortgages and handles foreclosures. The changes will prevent robo-signing and ensures accurate information is used in court, Madigan said in a press release. In addition, the settlement requires HSBC to use foreclosure only as a last resort and restrict foreclosure while a homeowner is being considered for a loan modification. Other requirements include implementing new procedures for reviewing loan modification applications and allowing homeowners the right to appeal loan modification denials. An independent monitor will oversee HSBC’s compliance with the settlement.
However, Minchella said the penalties haven’t been harsh enough to ensure banks will not commit abuses in the future.
“Going forward, it’s not enough to stop them,” she said.
The settlement earlier this month would provide financial assistance to homeowners who actually suffered a loss because of allegedly abusive mortgage practices between January 2008 and December 2012. Boyce said an administrator will contact borrowers eligible who are eligible to file a claim later this year by mail. Several hotlines have been setup to address questions homeowners may have about the settlement. For loans serviced by HSBC Bank USA, borrowers should call 866-435-7085. For loans serviced by HSBC Mortgage Services, Household Finance or Beneficial, borrowers should call 800-333-7023.