The U.S. divisions of London-based HSBC allegedly violated New York state law and put homeowners at “greater risk of losing their homes,” according to a lawsuit filed Tuesday by New York Attorney General Eric T. Schneiderman.
At the heart of the suit is a “Request for Judicial Intervention” (RJI). Residential mortgage lenders, servicers and their agents who sue to foreclose on a homeowner are required to file an RJI when they file their proof of service, or legal notice of a foreclosure, with the county clerk.
The lender must attend a settlement conference within 60 days of the RJI. The court-supervised conference provides an opportunity for borrowers to negotiate alternatives to foreclosure, including loan modifications that make mortgage payments more affordable.
In New York, thousands of foreclosure cases are languishing for months and years because lenders and their servicers delay filing the paperwork that triggers the settlement conference, Schneiderman said.
The subsequent backlog of cases is referred to as the “shadow docket,” and has become a burden on homeowners and the judicial system. An estimated 25,000 New York families are trapped in the shadow docket.
The delays come at a big cost to the homeowners. HSBC allegedly continued to charge interest and assess fees and penalties, adding thousands of dollars to what the homeowners owed. Those additional charges put homeowners at greater risk of losing their homes because they may not qualify for a loan modification.
“Companies like HSBC are brazenly ignoring state law, leaving homeowners across New York stuck in a legal limbo where they can’t even get the legally required settlement conference that could help them keep their homes,” Schneiderman said.
Schneiderman filed the suit in New York Supreme Court seeking to compel HSBC to file the RJI immediately in all cases in which it has filed a proof of service, and to file an RJI simultaneously with proof of service in all future cases.
In cases where HSBC has already failed to file the RJI with proof of service on the homeowner, the suit also seeks to force HSBC to take the following steps to protect New York homeowners:
- Prepare an accounting of interest charges, penalties and fees (for example: late fees, inspection fees, attorney’s fees, broker reports) that accrued beginning 60 days after the filing of proof of service on the homeowner;
- Toll and waive all accrued interest charges, fees and penalties that accrued, or will accrue, beginning 60 days after the filing of proof of service on the homeowner;
- Grant restitution for interest charges, fees and penalties paid by the homeowner that accrued beginning 60 days after the filing of proof of service on the homeowner; and
- Grant damages to homeowners injured by HSBC’s illegal practices.