Cook County, Ill., is suing HSBC North America Holdings Inc. for allegedly targeting minority borrowers in Chicago with high-cost mortgages. The municipality is seeking unspecified damages for alleged costs to police, to maintain deteriorating neighborhoods, and from tax revenue forfeited on vacant properties. The complaint was filed March 21.
Baltimore, Cleveland, and Memphis each have taken similar action targeting banks under the Fair Housing Act, claiming that the financial institutions made loans to minority borrowers who did not qualify. Banks have also been accused of giving costly subprime home loans to minorities who could have qualified for prime financing. The lawsuits argue that such actions contributed to the U.S. financial crisis.
Cook County's complaint says that HSBC Mortgage Services Inc., which used “bulk underwriters” to buy subprime loans from third-party originators, approved loans for low-income borrowers. If the bulk underwriters did not believe the stated income was accurate, they were allegedly told to approve the loan regardless.