* British lender agrees to pay $10 million
* Taxpayers said to be cheated via inflated fees
* HSBC showed "gross neglect" - regulator
(Adds HSBC statement, paragraph 7)
By Nate Raymond and Jonathan Stempel
NEW YORK, July 1 HSBC Holdings Plc
agreed to pay $10 million to settle U.S. government charges that
it defrauded taxpayers by submitting inflated bills to process
The civil settlement announced Tuesday is the first to
result from an investigation by U.S. Attorney Preet Bharara in
Manhattan into whether mortgage servicers overcharged the
government on foreclosures on federally-backed home loans.
According to settlement papers, HSBC admitted and accepted
responsibility for having failed in 2009 and 2010 to properly
police foreclosure-related fees charged by outside lawyers and
other service providers.
HSBC would submit inflated fees to the Federal Housing
Administration, which is part of the Department of Housing and
Urban Development, and government-controlled mortgage company
Fannie Mae for reimbursement, the papers show.
The British lender's inadequate oversight led to millions of
dollars of losses for the FHA and Fannie Mae, Bharara said.
"Their lack of controls showed gross neglect and an abject
failure to serve their customers, FHA and Fannie Mae, and
therefore the taxpayers," Michael Stephens, acting inspector
general at the Federal Housing Finance Agency, which oversees
Fannie Mae, said in a statement.
HSBC spokesman Rob Sherman said the bank is pleased to
settle. "Since 2010, we have taken steps to enhance oversight of
foreclosure law firms, and put in place a robust law firm
management and oversight program even before we received notice
of this particular action," he said.
The accord resolves claims under a federal whistleblower law
known as the False Claims Act. The identity of the whistleblower
could not immediately be determined.
A typical foreclosure can cost $1,000 to $3,000. Much of the
sum goes toward legal fees, and other expenses can go toward
court filing costs, mailings and title searches.
At least $6 trillion of loans overseen by large servicers in
the United States from 2009 to 2012 were delinquent or in
foreclosure, the trade publication Inside Mortgage Finance said.
Other companies have also received subpoenas from Bharara's
office related to foreclosure fees charged to the FHA, Fannie
Mae and Freddie Mac.
Among the recipients are Banco Santander SA,
MetLife Inc, PHH Corp, PNC Financial Services
Group Inc and Royal Bank of Scotland Group Plc's
Citizens Financial unit, according to regulatory filings. None
immediately responded on Tuesday to requests for comment.
The case is U.S. v. HSBC Bank USA NA et al, U.S. District
Court, Southern District of New York, No. 13-01467.
(Additional reporting by Aruna Viswanatha in Washington, D.C.;
Editing by Grant McCool)