* British lender agrees to pay $10 million
* Taxpayers said to be cheated via inflated fees
* HSBC showed "gross neglect" - regulator (Adds HSBC statement, paragraph 7)
By Nate Raymond and Jonathan Stempel
NEW YORK, July 1 (Reuters) - HSBC Holdings Plc agreed to pay $10 million to settle U.S. government charges thatit defrauded taxpayers by submitting inflated bills to processresidential foreclosures.
The civil settlement announced Tuesday is the first toresult from an investigation by U.S. Attorney Preet Bharara inManhattan into whether mortgage servicers overcharged thegovernment on foreclosures on federally-backed home loans.
According to settlement papers, HSBC admitted and acceptedresponsibility for having failed in 2009 and 2010 to properlypolice foreclosure-related fees charged by outside lawyers andother service providers.
HSBC would submit inflated fees to the Federal HousingAdministration, which is part of the Department of Housing andUrban Development, and government-controlled mortgage companyFannie Mae for reimbursement, the papers show.
The British lender's inadequate oversight led to millions ofdollars of losses for the FHA and Fannie Mae, Bharara said.
"Their lack of controls showed gross neglect and an abjectfailure to serve their customers, FHA and Fannie Mae, andtherefore the taxpayers," Michael Stephens, acting inspectorgeneral at the Federal Housing Finance Agency, which overseesFannie Mae, said in a statement.
HSBC spokesman Rob Sherman said the bank is pleased tosettle. "Since 2010, we have taken steps to enhance oversight offoreclosure law firms, and put in place a robust law firmmanagement and oversight program even before we received noticeof this particular action," he said.
The accord resolves claims under a federal whistleblower lawknown as the False Claims Act. The identity of the whistleblowercould not immediately be determined.
A typical foreclosure can cost $1,000 to $3,000. Much of thesum goes toward legal fees, and other expenses can go towardcourt filing costs, mailings and title searches.
At least $6 trillion of loans overseen by large servicers inthe United States from 2009 to 2012 were delinquent or inforeclosure, the trade publication Inside Mortgage Finance said.
Other companies have also received subpoenas from Bharara'soffice related to foreclosure fees charged to the FHA, FannieMae and Freddie Mac.
Among the recipients are Banco Santander SA,MetLife Inc, PHH Corp, PNC Financial ServicesGroup Inc and Royal Bank of Scotland Group Plc's Citizens Financial unit, according to regulatory filings. Noneimmediately responded on Tuesday to requests for comment.
The case is U.S. v. HSBC Bank USA NA et al, U.S. DistrictCourt, Southern District of New York, No. 13-01467. (Additional reporting by Aruna Viswanatha in Washington, D.C.;Editing by Grant McCool)