SunTrust has reached a nearly $1 billion settlement with the government to resolve allegations that it underwrote and provided risky mortgage loans - a settlement involving several states, including Tennessee and Georgia.
The Justice Department on Tuesday announced the $968 million deal with SunTrust Mortgage, a Virginia-based lender and subsidiary of SunTrust Banks.
Attorney General Eric Holder said SunTrust's conduct is a "prime example" of the widespread underwriting failures that helped bring about the recent financial crisis.
As part of the deal, SunTrust has agreed to provide $500 million in homeowner relief and $418 million to resolve allegations that it underwrote bad loans.
SunTrust chief executive William Rogers said in a statement that the bank was pleased to have resolved the allegations.
The settlementas mortgage servicing terms closely mirrors the 2012 National Mortgage Settlement (NMS) between the federal government, 49 state attorneys general (including Tennessee and Georgia), and the five largest national mortgage servicers. That agreement has provided Tennessee with over $200 million in benefits, including loan modifications that have helped homeowners avoid foreclosure by restructuring their mortgage payments. The NMS created tough new servicing standards, requiring the nationas largest mortgage companies to work proactively and promptly with homeowners facing foreclosure.
The settlement requires SunTrust to provide Tennessee borrowers loan modifications or other relief. The modifications, which SunTrust chooses through an extensive list of options, include principal reductions and refinancing for underwater mortgages. SunTrust will determine which and how many loans to modify within the settlementas criteria. Because SunTrust receives only partial settlement credit for many types of loan modifications, the settlement will provide relief to borrowers that will exceed the overall minimum amount.
More information about the loan modification process will be released at a later date, though current borrowers with loans serviced by SunTrust can contact the company directly with questions.
More than 2,000 eligible Tennessee borrowers whose loans were serviced by SunTrust and who lost their home to foreclosure from Jan. 1, 2008 through Dec. 31, 2013 and encountered servicing abuse will be eligible for a payment from the national $40 million fund for payments to borrowers.
The borrower payment amount will depend on how many borrowers file claims. Eligible borrowers will be contacted about how to qualify for payments.
The settlement requires SunTrust to substantially change how it services mortgage loans, handles foreclosures, and ensures the accuracy of information provided in federal bankruptcy court. The terms will prevent past foreclosure abuses, such as robo-signing, improper documentation and lost paperwork. The settlement creates dozens of new consumer protections and standards, including:
- Making foreclosure a last resort by first requiring SunTrust to evaluate homeowners for other loss mitigation options;
- Restricting foreclosure while the homeowner is being considered for a loan modification;
- New procedures and timelines for reviewing loan modification applications;
- Giving homeowners the right to appeal denials; and
- Requiring a single point of contact for borrowers seeking information about their loans and maintaining adequate staff to handle calls.
The National Mortgage Settlementas independent monitor, Joseph A. Smith Jr., will oversee SunTrust agreement compliance. Smith will oversee implementation of the servicing standards required by the agreement; impose penalties of up to $1 million per violation (or up to $5 million for certain repeat violations); and issue regular public reports that identify any quarter in which a servicer fell short of the standards imposed in the settlement.
In addition, the settlement resolves potential violations of civil law based on SunTrustas deficient mortgage loan origination and servicing activities. The settlement does not prevent state or federal authorities from pursuing criminal enforcement actions related to this or other conduct by SunTrust. Additionally, the settlement does not prevent any action by individual borrowers who wish to bring their own lawsuits.
Borrowers should contact SunTrust directly at 1-800-634-7928 or on the website
to determine whether they qualify for relief under the terms of this settlement.
A settlement administrator will contact qualified borrowers associated with foreclosed loans regarding cash payments. More information will be made available as the settlement programs are implemented. For more information about free foreclosure prevention counselors or mortgage assistance programs in Tennessee, struggling homeowners may visit the State Attorney General's website
or call the State of Tennessee's free Mortgage Assistance Hotline at (855) 876-7283 Monday-Friday, 9 a.m. to 5 p.m. CT.