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SunTrust Agrees to $1 Billion Agreement over Mortgage Loan and Foreclosure Abuses View Count: 325
The US Department of Justice announced this week that the DOJ, The Department of Housing and Urban Development (HUD), the Consumer Financial Protection Bureau and 49 state attorneys general and the attorney general of Washington DC have reached a $968 million agreement with SunTrust Mortgage Inc to address foreclosure and mortgage loan origination abuses.
Attorney General Eric Holder said, “SunTrust’s conduct is a prime example of the widespread underwriting failures that helped bring about the financial crisis … From mortgage origination to servicing to securitization, the Department of Justice is attacking every facet of conduct that led to the Great Recession. 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. We expect that there will be more cases like this to come.”
According to the agreement SunTrust will have to provide $500 million in consumer relief to homeowners and abide by the terms that will help prevent past abuses from being repeated.
As part of the settlement, SunTrust has agreed to pay $418 million to resolve its potential liability under the federal False Claims Act for originating and underwriting loans that violated its obligations as a participant in the Federal Housing Administration (FHA) insurance program. As a participant in that program, SunTrust had the authority to originate, underwrite and certify mortgages for FHA insurance.
The company admitted that between 2006 and 2012 it originated and underwrote FHA-insured mortgages that did not meet FHA requirements, that it failed to carry out an effective quality control program to identify non-compliant loans, and that it failed to self-report to HUD even the defective loans it did identify.
SunTrust also admitted that numerous audits and other documents disseminated to its management between 2009 and 2012 described significant flaws and inadequacies in SunTrust’s origination, underwriting, and quality control processes, and notified SunTrust management that as many as 50 percent or more of SunTrust’s FHA-insured mortgages did not comply with FHA requirements.SunTrust Agrees to $1 Billion Agreement over Mortgage Loan and Foreclosure Abuses by Scott