Metro Atlanta Counties Sue HSBC for Predatory Lending

Cobb, DeKalb, and Fulton counties have filed a lawsuit against HSBC, claiming the bank engaged in predatory lending practices, Channel 2 Action News reports.

The suit, filed in federal court, claims violations of the Fair Housing Act. The counties allege that HSBC made racially discriminatory loans, involving different terms for minorities and persons of color.

According to the suit, HSBC violated the Fair Housing Act by offering minorities different terms than they were offering to other people. Under the act, it’s illegal to impose different terms – including interest rates, points, or fees – based on a person’s race, color, national origin, religion, sex, familial status, or handicap.

The Act also protects consumers from other predatory lending practices. The typical predatory loan is in excess of those granted to similarly situated borrowers, is not justified by the borrower’s creditworthiness, and is secured by the borrower’s home. In other words, the borrower is set up for failure, allowing the lender to swoop in for the foreclosure.

Lawsuits brought under the Fair Housing Act are usually filed by the individuals who were injured by the practices, not the government. “It is the first instance in Georgia of the local governments, on behalf of the people, saying, ‘We are all victims of the mortgage foreclosure crisis,” said Emory professor Frank Alexander, who specializes in real estate finance.

HSBC currently owns only about 160 properties in the three counties, but has held more than 3,500 properties since 2006, according to Channel 2. Since most banks only keep a fraction of the homes they foreclose on, HSBC’s foreclosure totals are probably much higher.

HSBC also bought Household Finance Corporation, a company that has been linked tofor questionable lending practices. “Household Finance was known to be originating a lot of mortgages which everyone would classify as a predatory loan with very low likelihood that it would live as a mortgage more than a few months or years before it goes into default,” Alexander told Channel 2.

Related Resources:

• Need an Atlanta Bankruptcy Lawyer? (FindLaw)
• Counties File Suit in Housing Crisis (The Atlanta Journal-Constitution)
• Foreclosure Process (FindLaw)
• Government-Funded A123 Systems Runs Out of Juice (FindLaw’s Atlanta Bankruptcy Law Blog)