In its annual report filed on Monday, HSBC Holdings PLC (HBC) disclosed that it has suspended foreclosure process in U.S. The company had to take this action after the Federal Reserve and the Office of the Comptroller of the Currency (OCC) found problems with its foreclosure procedures.
HSBC stated that the regulators and the OCC found deficiencies in the procedures, preparation and signing of affidavits and other documents pertaining to the foreclosures. Further, the investigators took into account the monitoring and evaluation of the law firms, which were hired by the company to handle the foreclosures.
Hence, HSBC has stopped the foreclosures until the above mentioned problems are solved. The company is presently reviewing the foreclosures where judgment has not been passed. If necessary, the company will correct the improper documents and file new affidavits.
HSBC is soon expected to get orders from the investigators pointing out what is required to be fixed in its foreclosure procedure. As a result of foreclosure moratorium, the company may have to bear extra cost related to the investigations. HSBC might also face private litigation concerning its practices and procedures.
Additionally, HSBC may require financial and managerial resources to address these flaws and could have to pay fines and civil penalties. These fines may have financial implications and even impact the company’s near-term results.
HSBC is not the only bank that has stalled foreclosure process in the recent past. In September-October last year, U.S. lenders – JPMorgan Chase & Co. (JPM), Bank of America Corporation (BAC), Ally Financial Inc – temporarily suspended foreclosures across the country. The main reason for the halt was that there were various faults in the documents as a result of using ‘robo-signers’: employees who sign hundreds of documents a day without verifying decisive information like the previously outstanding amounts of borrowers.
Though foreclosure suspension has been lifted by these big banks, the regulators might penalize them for their critical deficiencies. Though the extent and timing of punishment is yet to be finalized, we can presume that it would come as a lesson to mortgage servicers and lessen the looming threat on housing recovery.
HSBC currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
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