Lawsuit alleges HSBC took advantage of sub prime loans situation.

The situation in the US with sub-prime loans and mortgages has allegedly been used by HSBC to their advantage. The Daily Telegraph reported that a real estate fund Luminent Mortgage Capital has claimed that an office of HSBC placed low valuations on nine sub-prime mortgage bonds which Luminent had put up as collateral for loans.

HSBC purchased the bonds at a large discount, even running an auction for one bond that included just one other bidder.

The lawyer for the lawsuit claims that HSBC was taking advantage of the unusual situation in the US credit markets to rip off it's trading partners

There are many angles to this so called credit crunch and the implications spread far and wide to many different types of compaines as well as exiting and future borrowers of mortgages and personal loans. The last thing many companies needs is for additional pressure to be exerted by larger financial institutions, who may choose to use their size and weight to bully their way through the crisis.

The ultimate fall-out of the situation will not be fully known for several months and only recently Merrill Lynch had to increased the size of it's estimated exposure to poor debt, adding several billion pounds to an estimate that had been calculated only a few weeks before.

In the UK many loan providers have rapidly reorganised their product portfolios in an attempt to minimise risk exposure while the true situation unravels. Some observers think there may have been an over-correction and the rate that new loans and mortgages are selling at could be too high and subject to a downward re-correction before too long.

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