HSBC Sued for Dragging Feet on Foreclosure Process

by devteam June 5th, 2013 | Share

Citingrnhis concerns that homeowners across New York State are being held inrn“legal limbo”, the state’s Attorney General, Eric T.rnSchneiderman, has filed suit against HSBC Bank and HSBC MortgagernCorporation. The lawsuit alleges that the two have failed to followrna state law related to foreclosure actions which may have left anrnestimated 25,000 families trapped in what is called the “shadowrndocket.”</p

ThernNew York law requires that residential mortgage lenders,rnservicers and their agents who sue to foreclose on a homeowner file arn”Request for Judicial Intervention” (RJI) when they file theirrnproof of service with the county clerk. The RJI initiates a processrnthat mandates the lender attend a settlement conference within 60rndays to enable the borrower to negotiate possible alternatives tornforeclosure. This could include a loan modification that might makerntheir payments more manageable. </p

Arnpress release from Schneiderman’s office announcing the suitrnmaintains that thousands of foreclosure cases across the state arern”languishing for months, even years, because financial institutionsrndelay filing the paperwork that triggers the settlement conference.”rn This creates a backlog of cases (the shadow docket) which has becomerna major burden on homeowners and the legal system. The estimate ofrn25,000 affected borrowers comes from New York’s Office of CourtrnAdministration. </p

The investigationrnof HSBC and its subsidiary, the New York AG’s office said, showedrnthey “repeatedly failed to timely file the RJI in hundreds ofrnforeclosure cases against New York homeowners, increasing the riskrnthat those homeowners would lose their homes. A sampling of HSBCrnforeclosure filings from four counties — Erie, Monroe, Suffolk andrnBronx — identified close to 300 instances where HSBC failed to filernthe RJI with the proof of service.” In some of those cases it isrnalleged that, homeowners waited for over two years for HSBC to filernthe RJI while the bank continued to charge interest and assess feesrnand penalties, adding thousands of dollars to what the homeownerrnowed. Those additional charges also put homeowners at greater riskrnthat they could not qualify for a loan modification. </p

 “Companiesrnlike HSBC are brazenly ignoring state law, leaving homeowners acrossrnNew York stuck in a legal limbo where they can’t even get thernlegally required settlement conference that could help them keeprntheir homes,” Schneiderman said.</b"For homeowners facing foreclosure, time is their greatestrnenemy. Every day spent waiting for a settlement conference is a dayrnthat the lender piles on additional interest, fees and penalties andrnthe homeowner falls further behind."  </p

He cited specifics of one casernin which an Erie County resident fell into delinquency afterrnsuffering medical issues and losing her job. HSBC filed the proof ofrnservice on November 12, 2010 but did not file the RJI until 19 monthsrnlater. Fees accrued during that period  increased the principalrnbalance on her loan by $23,000 by the time she was able to request arnmodification. </p

Schneiderman’srnsuit, filed in New York Supreme Court seeks to compel HSBC to filernthe RJI immediately in all cases in which it has filed a proof ofrnservice, and to file an RJI simultaneously with proof of service inrnall future cases. In cases where HSBC has already failed to file thernRJI the suit also seeks to compel HSBC to prepare an accounting ofrninterest charges, penalties and fees ­that accrued beginning 60rndays after the filing of proof of service on the homeowner and tollrnand waive those fees. In addition it demands HSBC grant restitutionrnfor these charges, fees and penalties that have been paid homeowners,rnand grant damages to homeowners injured by HSBC’s illegal practices.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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