BOISE, Idaho (News Release) – Idaho Attorney General Lawrence Wasden has joined a $470 million state and federal settlement with mortgage lender and servicer HSBC to address past mortgage origination, servicing and foreclosure abuses.

Wasden said the settlement announced Friday includes direct payments to more than 300 Idaho borrowers, loan modifications and other loan relief.

It also includes reforms in mortgage servicing standards and grants oversight authority to an independent monitor, Wasden said.

“The settlement holds HSBC accountable for its unacceptable mortgage servicing and foreclosure practices and it provides some relief for Idaho borrowers,” Wasden said. “Through tough servicing standards, the settlement will aid homeowners with enforceable changes to how their loans are serviced.”

Wasden said an estimated 321 Idaho borrowers who lost their homes to foreclosure because of HSBC’s servicing practices can seek payment from the national $59 million fund. The payments are intended for borrowers who lost their homes between Jan. 1, 2008 and Dec. 31, 2012.

Wasden said eligible borrowers will be contacted about how to qualify for the payments.

Under terms of the settlement, HSBC agrees to provide a series of loan modifications, including principal reductions and refinancing for underwater mortgages.

HSBC will determine how many loans and which loans to modify, but those loans must also meet certain minimum targets.

The settlement requires HSBC to make significant changes in how it services mortgage loans, handles foreclosures, and ensures the accuracy of information provided in federal bankruptcy court. The terms are designed to prevent past foreclosure abuses, such as robo-signing, improper documentation and lost paperwork.

Other consumer protections and standards in the settlement 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 loan modification;
  • Procedures and timelines for reviewing loan modification applications;
  • Giving homeowners the right to appeal denials.

The HSBC settlement also implements a one-year oversight component. It includes the appointment of Joseph A. Smith, Jr., as the independent monitor. Smith will have oversight on the implementation of new servicing standards and issue public reports on whether HSBC has complied or fell short of new standards imposed by the settlement.

The agreement will be filed as a consent judgment in the U.S. District Court of Columbia.

In addition to Idaho, the settlement involves 48 other states, the District of Columbia, the U.S. Department of Justice, the Consumer Financial Protection Bureau and the U.S. Department of Housing and Urban Development.