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Foreclosure-related malpractices continue to haunt HSBC Holdings plc (HSBC - Analyst Report). The U.K.-based lender recently entered into a $10 million settlement with the U.S. government to resolve claims under the False Claims Act. The news was reported by Reuters.

The aforementioned case was filed in U.S. District Court, Southern District of New York. It was being investigated by the U.S. Attorney Preet Bharara.

It was alleged that HSBC fraudulently charged excessive fees from Federal Housing Administration (FHA) and government sponsored enterprise (GSE), Fannie Mae (FNMA) for processing residential foreclosures on government-backed loans. The additional cost unduly charged was eventually borne by the taxpayers.

HSBC has accepted its wrongdoings, and acknowledged its inability to monitor the fees charged by various outsourced entities for the period 2009-2010. The company added that it has already taken measures to review its billing process in order to avoid the recurrence of similar blunders.

HSBC’s intraday stock price movement on NYSE reflected a positive investors’ sentiment following the news on Tuesday. The stock closed at $51.24, rising nearly 1% from the prior-day figure.

The one-time expenses in form of settlement fees will no doubt increase the cost burden for this Zacks Rank #3 (Hold) foreign bank. However, it clears a legal overhang, thereby enabling HSBC to focus on its core operations.

Apart from HSBC, the roles of several other banks in foreclosure abuses are being investigated by the U.S. Attorney. Some of the financial organizations there were issued subpoenas by the Attorney’s Office related to fraudulent foreclosure practices include Banco Santander, S.A., PHH Corporation, The PNC Financial Services Group, Inc. (PNC - Analyst Report) and The Royal Bank of Scotland Group plc (RBS - Snapshot Report).

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