SunTrust to Pay Nearly $1B Over Foreclosures, Mortgage Practices
Several federal agencies and 49 state attorneys general struck a $968 million settlement Tuesday with SunTrust Mortgage over charges that it violated laws governing foreclosures as well as mortgage origination and servicing.
The agreement with the Justice Department, Consumer Financial Protection Bureau and the Department of Housing and Urban Development, along with the AGs, requires SunTrust to provide $500 million in relief to struggling borrowers, pay $418 million to DOJ, give $40 million in restitution to roughly 48,000 improperly foreclosed borrowers and pay an additional $10 million fine to the government.
The settlement resolves civil claims arising after multiple investigations revealed that SunTrust allegedly robo-signed mortgage documents and illegally foreclosed on consumers.
"Deceptive and illegal mortgage servicing practices have pushed families into foreclosure and devastated communities across the nation," said CFPB Director Richard Cordray, in a press release. "Today's action will help homeowners and consumers harmed by SunTrust's unlawful foreclosure practices. The Consumer Bureau will continue to investigate mortgage servicers that mistreat consumers, and we will not hesitate to take action against any company that violates our new servicing rules."
As part of the agreement with the Justice Department, SunTrust will pay $418 million to resolve liability for originating loans that violated its obligations under the Federal Housing Administration insurance program. The Justice Department said SunTrust admitted that from January 2006 to March 2012 it underwrote FHA-insured mortgages that did not meet FHA requirements nor did it have a quality control program to identify these loans or self-report issues it did uncover to HUD. During that period, SunTrust also admitted that management was made aware of these flaws numerous times and that at least half of its FHA-insured mortgages did not meet necessary requirements.
The agencies said they would follow a structure similar to the $25 billion National Mortgage Settlement of 2012 against the five largest servicers in determining relief payments. Under the agreement, SunTrust must pay $500 million to borrowers over the next three years in the form of mitigation activities, primarily by reducing principal or lowering interest rates.
"This agreement with SunTrust is another step forward in the Obama Administration's ongoing effort to hold mortgage lenders accountable," said HUD Acting Deputy Secretary Helen Kanovsky in a press release. "By using the framework of the National Mortgage Settlement, we will ensure that SunTrust provides mortgage relief to struggling homeowners in the hardest hit communities and changes their worst practices. HUD will continue working with the Department of Justice, CFPB and state attorneys general to hold lenders accountable and require them to institute practices that are beneficial to borrowers and the FHA fund."
Attorney General Eric Holder further indicated that SunTrust was an example of similar cases yet to come.
In response, SunTrust issued a statement saying that management was relieved that "certain legacy mortgage matters" from agreements alluded to last October have now been settled.
"As we said when these agreements in principle were announced, we are pleased to have resolved these legacy mortgage matters," said William H. Rogers Jr., the chairman and chief executive of SunTrust Banks in Atlanta, in a press release. "Like most major financial institutions, we are addressing issues related to mortgage matters stemming from the financial crisis and recession period."
The bank said during the last several years it "has made significant improvements to its mortgage underwriting processes and internal controls" including increasing training and the establishing a center specifically for underwriting all government-insured mortgages.