HSBC Bank’s US arm is under investigation for redlining

HSBC Bank USA on Tuesday disclosed that it is facing an investigation from the U.S. Department of Housing and Urban Development (HUD) for alleged redlining practices. 

The federal investigation is based on a complaint filed by the non-profit organization National Community Reinvestment Coalition (NCRC). 

According to filings with the Securities and Exchange Commission (SEC), HUD is investigating whether “HSBC Bank USA violated the U.S. Fair Lending Act by engaging in discriminatory lending practices in majority Black and Hispanic neighborhoods in six U.S. metropolitan areas from 2018 through 2021.” 

The NCRC complaint includes six metropolitan areas: New York (NY), Seattle (WA), Orange County (CA), Los Angles (CA), Oakland (CA) and the Bay Area (CA). 

A spokesperson for HUD said the agency “Does not comment on investigations or potential complaints.” HSBC did not reply to a request for comments. 

A representative for NCRC said in a statement that when “NCRC or our members find evidence of redlining or any other form of lending discrimination, we take prompt action.”

“We are always concerned by data that suggests unfair treatment of disenfranchised communities and individuals, and always glad to help ensure the appropriate authorities have an opportunity to review the facts and pursue any remedies they deem appropriate.”

Per the mortgage tech platform Modex, HSBC originated about $2 billion in mortgages in the last 12 months. Purchases and conventional loans were more than 77% of the total. California and New York are the main markets for the bank. 

That was the second time HSBC was questioned about its mortgage lending practices by federal agencies.

In 2016, the bank ended up paying a $601 million settlement to a series of federal agencies and nearly every state over charges that it engaged in mortgage origination, servicing and foreclosure abuses. 

In a separate but related settlement, HSBC paid $131 million to the Federal Reserve. According to the Fed, the penalty considers the circumstances of HSBC’s “unsafe and unsound practices and foreclosure activities.” 

U.S. regulators are active in investigating redlining cases.

In June, the U.S. Department of Justice (DOJ) announced a $3 million redlining settlement with ESSA Bank & Trust. It followed a $31 million settlement with City National Bank in January. In 2022, settlements were made with Trident Mortgage Co., Warren Buffet’s Berkshire Hathaway subsidiary; and Lakeland Bank.