BOSTON — The state of Massachusetts and HSBC Securities (HSBC) have reached a $26.8 million settlement regarding allegations the company secured unfair residential mortgage loans, according to the state attorney general.
The charges against HSBC, brought about by Massachusetts Attorney General Maura Healey, are among several other cases her office has brought against large investment companies such as Goldman Sachs, Morgan Stanley, JPMorgan and Citibank. The cases have resulted in recovery of more than $375 million for Massachusetts residents, the Attorney General's Office said.
“HSBC’s securitization practices contributed to a financial crisis that deeply harmed Massachusetts communities and caused families to lose their homes,” Healey said in a statement. “We will continue to help consumers who were sold toxic mortgages by these banking institutions and are pleased that this settlement will provide significant relief for families that have suffered harm from unsustainable subprime loans.”
According to the attorney general, the subprime loans, which were not originated but purchased by HSBC, had debt-to-income ratios of more than 50 percent, had substantial prepayment penalties, had loan to value ratios of more than 97 percent among other unfair features.
HSBC will pay $5 million to Massachusetts to compensate government entities including towns and cities which had extra expenses from the foreclosures of the loans. The Attorney General's Office said $20 million will go to homeowners for principal reductions, payments and to assist borrowers who went through foreclosure.