HSBC plans to pay $765 million to the U.S. Justice Department and $27 million to the Massachusetts attorney general's office to settle charges over the bank's origination and securitization of subprime and other residential mortgages prior to the financial crisis.
The bank, in its earnings report for the first six months of 2018 issued Monday, said it had reached a "settlement-in-principle" with federal authorities to settle unspecified accusations related to "the origination, financing, purchase, securitization and servicing of subprime and non-subprime residential mortgages" from 2005 to 2007. It said the Justice Department investigation is continuing.
A Justice Department spokesman said the agency had no comment on HSBC’s report.
The settlement with Massachusetts Attorney General Maura Healey has been finalized, the bank and Ms. Healey's office said in separate statements. In a news release, Ms. Healey's office said HSBC did not originate the loans but did buy them from subprime lenders and securitized them. The loans in question "had debt-to-income ratios over 50%, included substantial prepayment penalties, had loan-to-value ratios over 97%, and included other problematic features," according to the news release.
HSBC could still face other current or future lawsuits and actions related to the alleged activity, the six-month report said.