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HSBC Sued Again, This Time for Predatory Lending

Following a $2.5 billion judgment for securities fraud last year against HSBC Group, the financial firm is facing another lawsuit, this time for predatory lending and racial discrimination.

Miami consumer rights lawyers recognize that while the foreclosure crises impacted almost everyone in some way, the kinds of practices in which HSBC allegedly engaged assured that poor and minority borrowers would suffer disproportionately.

The Cook County, IL lawsuit (similar to claims brought by officials in Cleveland, Memphis and Baltimore) alleges that banks preyed on minority borrowers. It’s alleged in County of Cook v. HSBC North America Holdings Inc. that HSBC knew that these borrowers weren’t qualified to take out the loans for which they were applying, but they offered them anyway. In other cases, the bank reportedly meted out subprime, high-interest mortgages to minority borrowers who otherwise would have been qualified for prime loans.

Bulk underwriters were used to purchase the subprime loans from third-party originators. Some of the examples of approved loans involved cases where fast-food workers and gardeners had a listed income of $90,000-a-year. Underwriters were reportedly instructed to approve the loans, regardless of whether they believed the listed income was correct. The complaint alleges that this kind of policy was a reflection of HSBC’s “liberal” guidelines – though we believe that’s putting it rather kindly.

The end result of these practices was that minority-heavy neighborhoods have seen a disproportionate amount of foreclosures, blight and lost tax revenue.

A similar lawsuit filed last year in Los Angeles against Deutsche Bank AG referred to the financial giant as “the city’s biggest slumlord,” as it held the titles for thousands of foreclosed homes throughout the area. That case resulted in a settlement.

New lawsuits have recently been filed by that same city attorney against Bank of America, Citigroup and Wells Fargo, alleging similar actions. That lawsuit asserts that the companies are liable for the huge rate of foreclosures in L.A., particularly in neighborhoods heavily populated with minorities.

Previously, Bank of America and Wells Fargo had agreed to pay nearly $570 million to settle a federal action alleging violations of the Equal Credit Opportunity Act, as well as the Fair Housing Act.

Still, banks have universally denied that their actions were racist or wrong, even after reaching settlement agreements. This is in spite of the fact that is virtually undisputed that black and Hispanic borrowers were almost without exception given subprime loans – even when they qualified for less risky loans with reduced interest.

And in case you believe for a moment that the borrowers were at least partially to blame, consider this: In some cases, brokers were found to have used computer programs to scan certain records for traditionally Hispanic names. They then used this to push home sales on those individuals, taking advantage of the borrowers’ poor English language skills to secure the deal. These workers got bonuses not for securing good deals wherein the loans were likely to be repaid. Instead, they got bonuses based on the sheer number of mortgages sold, because those mortgages could then be bundled and resold to unsuspecting investors.

In Chicago, 99 percent of the most expensive loans were given to minorities, officials say.

In the end, this has meant that black and Latino homeowners across the country have been losing their homes at exponentially higher rates than their white counterparts because they have been made to pay hundreds of dollars more each month in interest payments. This has resulted in a great deal of tangible – and intangible – damage to these communities, which were already at a disadvantage even before the mortgage crisis.

If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Legal for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Debt Warriors with Bruce Jacobs,” discussing foreclosure topics that matter to YOU.

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