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Suit on HSBC foreclosures seen spurring other banks to follow law

State Attorney General Eric T. Schneiderman said he believes his office’s lawsuit against HSBC Bank USA over allegedly illegal foreclosure-related tactics will grab other banks’ attention.

“We went after HSBC; we think other banks are doing it, too,” Schneiderman said Tuesday while in Buffalo to announce the suit.

The suit in State Supreme Court accuses HSBC of ignoring a state law meant to guide homeowners and banks into settlement talks to resolve foreclosures. Schneiderman said the issue had been raised with HSBC “repeatedly” before the suit was filed, and he called the bank’s methods “clearly a broad, calculated strategy.”

“We brought this action against one bank,” he said. “We are hopeful that all of the other banks will take notice, and we’ll be able to work something out with everybody. But we clearly needed to do something more than just make phone calls to get their attention.”

An HSBC spokesman said in response to the suit: “HSBC is committed to compliance with all applicable laws, which includes those related to foreclosure. We will respond appropriately to the state in this matter.”

The suit claims HSBC failed to meet a requirement to file a “request for judicial intervention,” or RJI, when it sued homeowners and to notify the county clerk of the action. Schneiderman also referred to an Office of Court Administration report last year that found 25,000 New York State homeowners were in a “shadow docket,” in which a lender had started foreclosure proceedings without going through the process.

Schneiderman was asked if his office would sue other banks over the same issue.

“Our hope always is that others see what’s going on, and what we’re asking for is a full accounting from HSBC,” he said. “We’ve only scratched the surface of their failures to file the RJI forms and the number of people they’ve put on the shadow docket. We want a full accounting, which would expose this, and the other banks aren’t dumb. I think they know this is going on there, that the judiciary and our office are involved, and this particular game should be over.”

Schneiderman said his office’s lawyers and investigators gathered only a “sampling” of HSBC filings in county clerks’ offices in a four-county area and found “almost 300 examples” of HSBC failing to file requests for judicial intervention, “so we think this is kind of epidemic.”