HSBC Holdings plc will pay $10 million and admit misconduct to settle fraud charges resulting from its processing of residential foreclosures in 2009 and 2010, Preet Bharara, the U.S. Attorney for the Southern District of New York, announced on Tuesday.
The British bank was charged with passing along inflated fees from outside counsel and third-party providers for reimbursement from the Federal Housing Administration and the Federal National Mortgage Association. The overcharges amounted to millions of dollars, Bharara said.
“HSBC had a responsibility, as a servicer, to have controls in place which ensured the fees and charges submitted to Fannie Mae were appropriate and reasonable,” Michael Stephens, acting inspector general of the Federal Housing Finance Agency said in a prepared statement. “Their lack of controls showed gross neglect and an abject failure to serve their customers, FHA and Fannie Mae, and therefore the taxpayers.”
HSBC spokesman Rob Sherman says that in recent years, the bank has strengthened its review procedures. “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 told Reuters.
In connection with the settlement, the U.S. Department of Justice joined a pending private whistleblower suit filed against HSBC. That suit, which alleges False Claims Act violations, is under seal.