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SunTrust in Talks to Settle Claims on FHA Loan Originations

SunTrust Banks Inc. (STI), Georgia’s biggest lender, said it’s in talks with U.S. authorities to settle claims over its handling of loans backed by the Federal Housing Administration.

The U.S. Department of Justice and the Department of Housing and Urban Development’s inspector general informed the company of their preliminary investigative findings during the first quarter, Atlanta-based SunTrust said today in a regulatory filing. The allegations include violations of the False Claims Act, it said.

“The government and the company are engaged in settlement discussions, but the company disagrees with the analysis and methodology used to support the government’s allegations,” SunTrust wrote in the filing.

In October, the U.S. sued Wells Fargo & Co., the largest U.S. mortgage originator, over claims the San Francisco-based bank made reckless loans that caused losses for a federal insurance program when borrowers defaulted. The complaint alleges misconduct over more than a decade related to the firm’s participation in a Federal Housing Administration program and follows similar cases against other lenders including Citigroup Inc. and Deutsche Bank AG.

To contact the reporter on this story: Laura Marcinek in New York at lmarcinek3@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

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