HSBC Agrees to Settle Potential NCUA Claims for $5.25 Million

On March 12, 2012, the National Credit Union Administration (“NCUA”) announced that it reached a settlement with HSBC concerning potential claims arising out of HSBC’s sale of RMBS to five failed credit unions.  HSBC agreed to pay $5.25 million, and admitted no fault or liability in connection with the settlement.  This is the third pre-litigation settlement that NCUA has reached in connection with the potential RMBS claims of failed credit unions.  Press Release.

Fed Mortgage Loan Servicing Action Plans

On March 8, the Fed released action plans from HSBC, Ally and IMB HoldCo. to correct alleged deficiencies in residential mortgage loan servicing and foreclosure processing.  The Fed also released the engagement letter between HSBC and the independent consultant retained to review foreclosures that were in process in 2009 and 2010.  Fed Release.  Action Plans and Engagement Letter.

Independent Foreclosure Review

On November 1, the OCC announced that, in connection with the enforcement actions taken against 14 large mortgage servicers in April 2011, borrowers with foreclosure proceedings on their primary residences initiated by those servicers between January 1, 2009 and December 31, 2010 can request an independent consultant to review the potential foreclosure deficiencies if the borrowers believe they have suffered financial injury as a result of errors, misrepresentations, or other deficiencies in foreclosure proceedings. The Fed also announced that the four large mortgage servicers subject to enforcement actions that are supervised by the Fed (GMAC, HSBC, SunTrust, and EMC) will be required to conduct this program as part of their compliance with Fed procedures. The independent review is free of charge for borrowers. Requests for review by the servicers’ independent consultants must be received by April 30, 2012. OCC Release. Fed Release.

Mass. Mutual Life Insurance Files New RMBS Complaint

On May 23, 2011, Massachusetts Mutual Life Insurance Co. (“MassMutual”) filed a complaint in the U.S. District Court for the District of Massachusetts, alleging violations of the Massachusetts Uniform Securities Act in connection with MassMutual’s purchase of $13 million in RMBS from HSBC and its subsidiaries. MassMutual alleges that in marketing the sale of the RMBS, defendants misrepresented that the underlying loans were prudently underwritten and had certain characteristics, including specific loan-to-value ratios and owner-occupancy statistics. Complaint.

Plaintiffs Firm Announces “Investigation” Into Various Banks Regarding FHA Mortgage Insurance

On May 4, 2011, the law firm Keller Rohrback, which currently represents the Federal Home Loan Banks of Seattle and Chicago in various RMBS cases, announced an investigation into a number of banks and mortgage lenders for violations stemming for those banks’ status as Direct Endorsement Lenders for the Federal Housing Administration (“FHA”). According to the announcement, each of the banks, including JPMorgan Chase, Bank of America, Bear Stearns Residential Mortgage, Washington Mutual, Citigroup, Countrywide, and HSBC, received insurance from FHA for the mortgages it originated. The investigation focuses on the banks’ mortgage lending practices, which Keller Rohrback asserts were lax and riskier than FHA’s standards allowed. Specifically, the law firm intends to review the banks’ due diligence standards, evaluations of borrower income, and property appraisals. The U.S. Department of Justice earlier this week commenced an action in the Southern District of New York against Deutsche Bank alleging similar practices. Release.