BOSTON (Legal Newsline) – Attorney General Maura Healey announced that her office has secured a settlement with HSBC that will have the national mortgage lender and servicer pay $4 million to resolve allegations of illegal commissions and kickbacks.
HSBC will pay $2.67 million in restitution to affected Massachusetts homeowners and $1.4 million to the state. Thousands of borrowers were allegedly improperly charged force-placed insurance premiums, and the settlement will provide them with refunds.
“Mortgage servicers should not enrich themselves through insurance products at the expense of struggling homeowners,” Healey said. “This agreement ensures that HSBC returns the money to Massachusetts consumers it received in violation of state laws.”
Force-placed insurance is property insurance that mortgage servicers obtain when they have reason to believe a homeowner failed to keep adequate homeowners insurance.
HSBC allegedly received compensation tied to force-placed insurance premiums charged to borrowers until 2012 and Healey’s office believes this created a conflict of interest.
This allegation stems from the claim that an HSBC affiliate was paid commissions by Assurant Inc., an insurance company, for force-placed policies. Yet, according to the state, the affiliate did not perform the traditional functions of an insurance company. Additionally, HSBS allegedly participated in an Assurant program that allowed it to reap financial benefits from Assurant’s force-placed insurance business.