HSBC Holdings defeated New York's lawsuit alleging its paperwork delays put property owners in foreclosure at an increased risk of losing their homes.
Delays in filing documents associated with foreclosures don't rise to the level of illegal acts, a state judge in Buffalo, N.Y., ruled on March 30, according to a copy of the decision obtained by Bloomberg News. The decision couldn't immediately be confirmed in court records.
"Despite this ruling, Attorney General Schneiderman will continue to fight for families struggling to recover from the housing crisis," a spokesman for the state official, Matt Mittenthal, said in a statement. He declined to say whether the attorney general will appeal the decision.
Eric Schneiderman, a Democrat, filed the lawsuit in 2013 alleging that HSBC failed to give homeowners the legally required chance to negotiate loan modifications, leaving them languishing in foreclosure proceedings. The company said at the time it was in compliance with applicable laws.
State Supreme Court Justice John L. Michalski said in his decision that the delay of or failure to file certain documents, which would trigger scheduling of settlement negotiations, are violations of "purely procedural" administrative rules rather than state law.
Schneiderman "cannot simply create a remedy where none is authorized by statute," the judge said in the ruling.
"We of course agree with the court's decision to dismiss the case, and remain committed to ensuring that struggling homeowners are treated fairly," Rob Sherman, a spokesman for HSBC, said in a statement.
The ruling is a second blow this year to the New York attorney general's efforts to take action against banks over alleged failures to follow proper foreclosure procedures and allow homeowners to seek loan modifications.
In February, he lost
New York's law governing foreclosures requires court-supervised settlement conferences where homeowners can try to work out alternatives to foreclosure such as loan modifications that cut monthly payments.
Lenders and servicers who sue to foreclose in New York must file a request for judicial intervention at the same time they file proof of service on the foreclosure action. A settlement conference is supposed to take place within 60 days.
The state alleged HSBC failed to file the required paperwork in hundreds of foreclosure cases in New York, putting off the request for judicial intervention in some instances for more than two years.
