SunTrust Banks, Inc., announced it has struck a nearly $1 billion deal with the government to settle allegations of misconduct in both its lending and servicing practices.
In an agreement reached with the Consumer Financial Protection Bureau (CFPB), Justice Department, HUD, and attorneys general in 49 states and the District of Columbia, SunTrust agreed to provide relief to consumers and payments to the government totaling a combined value of $968 million.
Among other complaints, the government had charged SunTrust with "systemic mortgage servicing misconduct," including failing to promptly and accurately apply borrower payments, robo-signing, and other illegal foreclosure practices.
The government order requires the company to provide $500 million in relief to underwater borrowers. SunTrust is also required to pay $40 million to approximately 48,000 consumers who lost their homes as well as $10 million to cover losses suffered by the Federal Housing Administration (FHA) and other government insurers.
In a statement, SunTrust Banks chairman and CEO William H. Rogers Jr. said, "As we said when these agreements in principle were announced, we are pleased to have resolved these legacy mortgage matters. Like most major financial institutions, we are addressing issues related to mortgage matters stemming from the financial crisis and recession period."
The bank said it will not incur an incremental charge as a result of the settlement.
In addition, SunTrust will pay $418 million to resolve its potential liability for originating and underwriting FHA loans between January 2006 and March 2012 that did not meet agency requirements. According to a release from the Justice Department, the bank admitted that numerous audits between 2009 and 2012 "described significant flaws and inadequacies in SunTrust's origination, underwriting, and quality control processes," with as many as 50 percent or more of FHA-insured mortgages in non-compliance.
"SunTrust's conduct is a prime example of the widespread underwriting failures that helped bring about the financial crisis," said Attorney General Eric Holder. "From mortgage origination to servicing to securitization, the Department of Justice is attacking every facet of conduct that led to the Great Recession."
The servicing portion of the settlement mirrors the 2012 $25 billion National Mortgage Settlement between top servicers and the government, which the Justice Department says was used as a framework for the latest deal.
While the agreement closes the book on potential violations in SunTrust's origination and servicing operations, it does not prevent agencies from pursuing the bank on criminal actions or wrongful securitization conduct. It also leaves the door open for CFPB to take civil enforcement actions on any future violations of its mortgage servicing rules implemented at the start of the year.