Victims of discrimination on the part of SunTrust Mortgage will share in a $21 million settlement agreed to yesterday by the company and the Department of Justice (DOJ). SunTrust, a wholly owned subsidiary of the nation's 11th largest commercial bank, was accused in a lawsuit of engaging in a pattern or practice of discrimination against African-American and Hispanic borrowers.
The lawsuit claimed that these qualified borrowers were charged higher prices for loans obtained between 2005 and 2009 through SunTrust Mortgage's regional retail offices and national network of mortgage brokers. The settlement ends a two-and-a-half-year investigation by DOJ which began after a referral by the Board of Governors of the Federal Reserve to DOJ's Civil Rights Division in December 2009. The investigation included a review of company documents and data on more than 850,000 loans. SunTrust cooperated fully with DOJ and agreed to settle the matter without contesting the litigation.
During the time period covered by the suit, SunTrust allowed its loan officers and mortgage brokers to vary a loan's interest rate and other fees from the prices the company set based on objective credit-related factors. This subjective pricing discretion resulted in minority borrowers paying more.
Prior to the settlement the company had instituted policies that substantially reduced this discretion and required reasons for any variations to be documented and reviewed by a supervisor. The settlement requires SunTrust to keep these improved policies in place for at least the next three years and to monitor its lending for signs of discrimination, reporting regularly to DOJ. The settlement also incorporates new Federal Reserve policies on loan originator compensation.
"Racial and ethnic bias have no place in the lending market," said Neil H. MacBride, U.S. Attorney for the Eastern District of Virginia in announcing the settlement. "We are pleased that SunTrust Mortgage is taking steps to compensate the victims and to ensure fair and equal access to credit in the future."
The proceeds of the settlement will be used to compensate borrowers in 34 states and the District of Columbia. An independent administrator will contact victims and distribute payments of compensation at no cost to borrowers. The announcement of the settlement gave no indication of how many borrowers might have been affected by the discrimination.
Earlier this week SunTrust Mortgage located in Richmond, Virginia, appointed David Stevens the current president of the Mortgage Bankers Association as its president.