SunTrust Will Pay $968 Million to Resolve Mortgage Probes
SunTrust Banks Inc. (STI) agreed to pay $968 million to resolve federal and state claims that a unit misrepresented the quality of mortgages the bank originated and deceived homeowners on loans it serviced.
The agreement covers loans SunTrust Mortgage made from January 2006 through March 2012 that were backed by the Federal Housing Administration even though they didn’t meet agency requirements, the Justice Department said in a statement today. Atlanta-based SunTrust disclosed the agreement in an October regulatory filing and has already accounted for the payment.
“SunTrust’s conduct is a prime example of the widespread underwriting failures that helped bring about the financial crisis,” Attorney General Eric Holder said in a statement. “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.”
The agreement is the latest effort by the Justice Department to wrap up investigations stemming from shoddy mortgages that fueled the financial crisis. Prosecutors are preparing lawsuits against Bank of America Corp. and Citigroup Inc. after the banks didn’t produce acceptable offers during talks to resolves probes into their sales of mortgage-backed bonds, a person familiar with the matter has said.
“Like most major financial institutions, we are addressing issues related to mortgage matters stemming from the financial crisis and recession period,” William H. Rogers, chairman and chief executive officer of SunTrust, said in a separate statement. “We are pleased to have resolved these legacy mortgage matters.”
The agreement resolves claims by the Justice Department, Department of Housing and Urban Development, Consumer Financial Protection Bureau and 49 states, according to the Justice Department’s statement. At least $500 million of the settlement will go toward consumer assistance.
SunTrust charged homeowners unauthorized fees on defaults, deceived them about foreclosure alternatives and improperly denied loan modifications, the CFPB said in a separate statement.
As many as 50 percent of SunTrust’s FHA mortgages didn’t comply with agency requirements, the Justice Department said, citing internal documents submitted to bank managers. The bank failed to have a program in place to identify non-compliant loans, and even when defective loans were found, they weren’t reported to HUD, the Justice Department said.
SunTrust still must contend with other government investigations into its business practices. The bank said in February that the Justice Department was investigating sales of single family home mortgages made to Fannie Mae and Freddie Mac. Separately, the company said that federal prosecutors may seek “substantial penalties” following an investigation into the company’s handling of mortgage applications.
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