SunTrust to pay $1B for providing faulty loans
Utahns who suffered abuses related to their mortgages or who were foreclosed on by SunTrust Mortgage Inc. may be eligible for some relief under a nationwide settlement.
SunTrust has agreed to pay nearly $1 billion to resolve allegations that it underwrote and provided faulty mortgage loans, the Justice Department and Utah Division of Consumer Services announced.
The $968 million settlement will include money for homeowner relief and a requirement that the company improve its handling of mortgage loans and foreclosures.
In announcing the agreement, authorities said SunTrust Mortgage, a Richmond, Va.-based mortgage lender and subsidiary of SunTrust Banks Inc., originated and underwrote bad loans between 2006 and 2012, gave borrowers false and misleading information and charged unauthorized fees.
"With today’s settlement in place, SunTrust borrowers will be eligible for direct relief and the company will be held accountable for its unacceptable past practices," Francine A. Giani, executive director of the Utah Department of Commerce, said in a news release on Tuesday.
Under terms of the settlement, Utahns may qualify for:
• Loan modifications, including a principal reduction and refinancing for underwater mortgages.
• Payments to borrowers who lost their homes to foreclosure from Jan. 1, 2008, to Dec. 31, 2013.
The agreement also requires SunTrust to implement changes to how it services loans, handles foreclosures and ensures the accuracy of information provided in federal bankruptcy court.
The company’s own internal documents showed an awareness of the problems, the government alleged, with one 2012 report referencing a "broken loan origination process."
"SunTrust’s conduct is a prime example of the widespread underwriting failures that helped bring about the financial crisis" of 2008, Attorney General Eric Holder said in a statement.
As part of the deal, SunTrust has agreed to provide $500 million to homeowners and borrowers who are at risk of default, $418 million to resolve allegations that it underwrote bad loans and a $50 million cash penalty. The settlement also involves the Department of Housing and Urban Development, the Consumer Financial Protection Bureau and state attorneys general from across the country. A monitor will ensure compliance with the agreement, which was filed in federal court in Washington.
SunTrust chief executive William H. Rogers Jr. said in a statement that SunTrust was pleased to have resolved the allegations. He said the company has made improvements to its mortgage underwriting processes and internal controls.
SunTrust had announced the anticipated settlement in October.