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* NY says HSBC ignored law designed to protect homeowners
* Bank declines to comment
By Neale Gulley and Jonathan Stempel
BUFFALO, N.Y./NEW YORK, June 4 (Reuters) - New York statesued HSBC Holdings Plc for ignoring a law designed toprotect struggling homeowners from being thrown into foreclosurewithout getting a chance to renegotiate their mortgages.
The lawsuit filed by Attorney General Eric Schneidermanaccuses Europe's largest bank of letting foreclosure caseslanguish by ignoring a state law intended to give homeowners achance to negotiate loan modifications.
Schneiderman said such delays have trapped as many as 25,000homeowners in a "shadow docket" of foreclosure cases backloggedas long as 2-1/2 years, causing them to rack up thousands ofdollars of needless interest, fees and penalties.
"Mick Jagger was wrong. If you're a homeowner, time is noton your side," Schneiderman said at a news conference,referencing the 1964 Rolling Stones hit "Time is On My Side."
Neal McGarity, an HSBC spokesman, declined to comment.
The lawsuit was filed on Monday in a New York state court inBuffalo and made public on Tuesday.
It accuses HSBC of regularly ignoring a state law requiringlenders to file paperwork, known as a request for judicialintervention, which entitles homeowners to settlementconferences within 60 days to negotiate loan modifications.
He said a sampling showed that since 2010 HSBC has been tooslow to file required paperwork in 297 cases in the counties ofThe Bronx, Erie, Monroe and Suffolk, and that thousands ofsimilar cases may exist in 58 other counties in the state.
"(HSBC's) business practices not only violate the law, butthey make it more likely that homeowners will unnecessarily losetheir homes," Schneiderman said in a court filing.
OTHER BANKS
The attorney general is still eyeing possible lawsuitsagainst Bank of America Corp and Wells Fargo & Co for violating terms of a nationwide settlement overmortgage servicing abuses.
Schneiderman accused the nation's second- and fourth-largestbanks last month of having failed to timely process modificationapplications. Wells Fargo is also the largestU.S. mortgage lender.
The $25 billion settlement reached in February 2012 alsocovered Ally Financial Inc, Citigroup Inc and JPMorganChase & Co, but not HSBC.
Schneiderman has not publicly suggested plans to sue thoseother lenders, but on Tuesday said unnamed financialinstitutions may become targets.
"Part of it depends on how this goes," he said, referring tothe HSBC lawsuit. "We are hopeful banks will see this andcomply."
As of March 31, HSBC Bank USA had $183.9 billion of assets,and operated more than 250 branches in 11 U.S. states andWashington, D.C., with about two-thirds of the branches in NewYork state.
Schneiderman's lawsuit seeks restitution for homeowners, awaiver of improper accrued charges and fees, other damages, anda requirement that HSBC file papers properly in the future.
The case is New York v. HSBC Bank USA et al, New York StateSupreme Court, Erie County, No. 001660-2013.
