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In the last couple of weeks SunTrust Banks has entered into settlements arising out of its mortgage practices. In mid June SunTrust reached an agreement with the Department of Justice, 49 states, and the District of Columbia to resolve two major investigations into mortgage related wrongdoing. The settlement required the payment of approximately $1 billion by SunTrust to address loan origination and customer service issues of wrongdoing.
This settlement involves relief to distressed homeowners of approximately $500 million and a cash payment of $468 million. The $500 million in borrower relief will include loan modifications. Of the cash $418 million will go to the federal government to address faulty loans written by SunTrust between 2006 and 2012. The faulty loans caused the Federal Housing Authority significant losses. The payments will be repayment to the Federal Housing Authority for those losses. Please see the Los Angeles Times article on this settlement, http://www.latimes.com/business/la-fi-suntrust-mortgage-settlement-20140618-story.html.
Today Department of Justice prosecutors in the Western District of Virginia announced a further agreement with SunTrust. In this agreement the bank will pay up to $320 million for its delay in approving mortgage modifications and for making misrepresentations to homeowners. The settlement divides the funds between borrower relief and housing counseling services. Most of the money SunTrust will pay will compensate shortchanged borrowers. The investigation involved the bank's compliance with the Home Affordable Modification Program.
SunTrust will provide $179 million for consumer restitution with the possibility of setting aside another $95 if necessary. Additionally, the bank will contribute $20 million to a fund for distribution to organizations providing housing counseling services. Also, the settlement requires SunTrust to make a $10 million payment to Fannie Mae and Freddie Mac. Fannie Mae and Freddy Mac are two government funded mortgage companies. Lastly, SunTrust will forfeit $16 million to the United States. The government estimates that thousands of borrowers who applied for loan modifications under the Home Affordable Modification Program may be entitled to relief.
For more on this settlement please see The New York Times, http://dealbook.nytimes.com/2014/07/03/suntrust-reaches-settlement-on-mortgage-modifications/?ref=business, and the Charlotte Observer, http://www.charlotteobserver.com/2014/07/03/5022505/suntrust-agrees-to-320m-settlement.html#.U7W3-orD-po.
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