Ohio, 48 other states and D.C. have joined a $470 million settlement with HSBC, a mortgage lender and servicer. Attorney General Mike DeWine announced the settlement last Friday.
According to a press release, the settlement will provide payments to almost 20,000 Ohioans who borrowed from HSBC between 2008 and 2012.
“Former and current borrowers will get relief. Current borrowers will get relief in the form of reduced terms of their mortgage, either reduced interest rates or forgiveness of a portion of a loan,” Dan Tierney, spokesperson for the Ohio Attorney General’s office, said. “People who may have lost their homes would receive direct cash payments, and moving forward there’s criteria that the company agrees to abide by for the protection of homeowners and borrowers and potential borrowers.”
The money from the HSBC settlement will be distributed in two stages, according to the U.S. Department of Justice. First, HSBC will distribute $100 million amongst the settling federal parties and two escrow funds: one which will allow states to make payments to borrowers whose homes were foreclosed and one to repay the 49 state attorneys general for the cost of their investigation. The rest of the settlement will be paid in the form of direct relief to homeowners and borrowers and will be completed by July 2016.
The settlement will put in place new consumer protections, such as requiring HSBC to make foreclosure a last resort and giving homeowners the right to appeal denials, according to the press release.
This settlement is similar to the 2012 National Mortgage Settlement between the country’s five largest mortgage servicers — Ally, GMAC, Chase, JP Morgan and Wells Fargo — as well as 49 states and the federal government. That $25 billion settlement, which covered borrowers from 2008 to 2010, has been closely monitored by a committee, of which the Ohio government is a member.
Since 2012, there have been several smaller settlements, including one $968 million settlement reached with SunTrust, a bank based in the southeastern United States. In each of these settlements, the companies involved provided data indicating who might meet the criteria to get money from the settlement. This is followed by a claims period that allows others to file a claim, Tierney said.
“The larger (settlement) with the major five moved forward and was enacted; the government monitored that,” Tierney said. “But they also looked at other complaints regarding other servicers. The national mortgage settlement certainly did provide a template for a settlement that a company could agree to and look at the terms that other banks have agreed was abuse of their borrowers, abuses such as robosigning and other servicing issues.”