HSBC Settles False Claims for $10M
HSBC has agreed to pay $10 million to settle allegations that the company knowingly submitted or caused the submission of false claims to federal housing and mortgage programs, the U.S. Attorney’s Office for the Southern District of New York announced last week.
HSBC performs or oversees the performance of certain administrative activities in connection with residential mortgage loans, such as collecting mortgage payments and pursuing foreclosure when borrowers become delinquent. In pursuing foreclosure on behalf of HSBC, outside counsel and other third-party providers of foreclosure-related services, such as title companies and process servers, incur fees and expenses. HSBC has routinely submitted reimbursement requests to the Federal Housing Administration (FHA) and Federal National Mortgage Association (Fannie Mae) for these foreclosure-related fees and expenses.
Pursuant to the National Housing Act, FHA offers mortgage insurance programs whereby it insures lenders against losses on mortgage loans, including expenses related to mortgage servicing, and specifically, expenses incurred in foreclosure proceedings. HSBC has been an approved servicer of FHA-insured loans for many years. In order to obtain and maintain FHA approval to service FHA-insured loans, HSBC was required to submit and did submit annual certifications stating that it adhered to all FHA handbooks, regulations and policies. One such handbook requires servicers to create and maintain a quality control program that reviews all aspects of servicing operations, including foreclosure fees and charges.
HSBC has also been an approved servicer of loans held by Fannie Mae. Fannie Mae is a government sponsored enterprise that purchases mortgage loans as part of its mission to promote liquidity in the housing market. Fannie Mae has been under the conservatorship of the Federal Housing Finance Agency since September 2008. As part of its obligations as a loan servicer for Fannie Mae, HSBC was required to create and implement audit and control systems to ensure compliance with Fannie Mae’s requirements. Specifically, as a servicer of Fannie Mae loans, HSBC was required to ensure that all costs submitted to Fannie Mae for reimbursement were reasonable, customary and necessary.
As set forth in the settlement, contrary to program requirements and HSBC’s certifications, HSBC failed to implement and maintain the requisite quality controls, failed to oversee the foreclosure-related charges it submitted to FHA and Fannie Mae for reimbursement, and caused millions of dollars in losses to FHA and Fannie Mae as a result.
The lawsuit was originally filed by an unnamed whistleblower under the qui tam provision of the False Claims Act. The Act allows private parties with knowledge of fraud against the government to sue on behalf of the government and share in the recovery. The original whistleblower suit remains under seal as the government continues its investigation.
The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who take action under the False Claims Act to report fraud committed against the federal and state governments. We have years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud. Read more about our expertise in False Claims Act cases and how you can take action.