SunTrust Banks will pay $968 million to resolve federal and state claims that it sold faulty mortgages to investors, as well as to complete its obligations under the national mortgage settlement.
Specifically, the company will pay consumer relief of $500 million and a cash fine of $468 million to settle claims related to its origination of Federal Housing Administration (FHA)-insured mortgages, as well as the penalties it owes for servicing violations under the 2012 national mortgage settlement.
Up to 50% of SunTrust's FHA mortgages issued between 2006 and 2012 reportedly didn't comply with agency requirements.
The bank had already paid a significant portion of what it owed for the servicing violations under the national mortgage settlement.
‘As we said when these agreements in principle were announced, we are pleased to have resolved these legacy mortgage matters,’ says William H. Rogers, Jr., chairman and CEO of SunTrust Banks Inc., in a statement. ‘Like most major financial institutions, we are addressing issues related to mortgage matters stemming from the financial crisis and recession period.’
SunTrust claims it has made ‘significant improvements to its mortgage underwriting processes and internal controls,’ including ‘increased training and the establishment of a center of specialization to underwrite all government-insured mortgages.’
This, in turn, ‘has led to improved quality control and significantly reduced error rates,’ the company says in a press release.
SunTrust additionally claims that all of its retail and correspondent origination locations are now fully compliant with the Consumer Financial Protection Bureau's (CFPB) new loan origination and disclosure rules.
In a separate statement, U.S. Attorney General Eric Holder says, ‘SunTrust's conduct is a prime example of the widespread underwriting failures that helped bring about the financial crisis. We will continue to hold accountable financial institutions that, in the pursuit of their own financial interests, misuse public funds and cause harm to hardworking Americans.’
SunTrust still faces a separate U.S. Department of Justice investigation into the bank's sales of single-family home mortgages made to Fannie Mae and Freddie Mac. As per a Bloomberg News report, federal prosecutors say this suit could result in ‘substantial penalties’ for the bank.
Meanwhile, Bank of America and Citigroup face similar suits from the Department of Justice and are currently in settlement negotiations.
With regard to SunTrust's servicing violations, a release from the CFPB states that the company ‘took advantage of homeowners with servicing shortcuts and unauthorized fees; failed to promptly and accurately apply payments made by borrowers; and charged unauthorized fees for default-related services.’
In addition the bank ‘deceived homeowners about foreclosure alternatives and improperly denied loan modifications; failed to provide accurate information about loan modification and other loss-mitigation services; failed to properly process borrowers' applications and calculate their eligibility for loan modifications; and provided false or misleading reasons for denying loan modifications.’
The CFPB also claims SunTrust ‘engaged in illegal foreclosure practices’ by providing ‘false or misleading information to consumers about the status of foreclosure proceedings where the borrower was in good faith actively pursuing a loss mitigation alternative also offered by SunTrust.’
‘The company also robo-signed foreclosure documents, including preparing and filing affidavits whose signers had not actually reviewed any information to verify the claims,’ the CFPB says in its release.