SunTrust Mortgage, has agreed to pay a total of nearly $1 billion to settle various complaints alleging abuses in mortgage origination, servicing, and foreclosure procedures including so-called robo-signing of foreclosure documents.  SunTrust, the nation's seventh largest mortgage servicer, will pay $968 million in both fines and restitution in the two part settlement.  

One portion of the settlement was announced by the Consumer Financial Protection Bureau (CFPB), Department of Justice (DOJ), Department of Housing and Urban Development (HUD), and attorneys general in 49 states and the District of Columbia.  The group filed a proposed federal court order requiring the company to provide $500 million in loss-mitigation relief to underwater borrowers, $40 million to approximately 48,000 consumers who lost their homes to foreclosure and $10 million to the federal government.  In addition to the financial settlement the order requires SunTrust to establish additional homeowner protections, including protections for consumers in bankruptcy.

Specifically the court order alleges that SunTrust:

  • Failed to promptly and accurately apply payments made by borrowers and charged unauthorized fees for default-related services.
  • Deceived homeowners about foreclosure alternatives and improperly denied loan modifications
  • Engaged in illegal foreclosure practices, provided false or misleading information to consumers about the status of foreclosure proceedings where the borrower was in good faith actively pursuing a loss mitigation alternative also offered by SunTrust. The company also robo-signed foreclosure documents, including preparing and filing affidavits whose signers had not actually reviewed any information to verify the claims.

The bank did not participate in the $25 billion 2012 servicing settlement with the same government entities over similar servicing abuse charges.   The nation's five largest banks were parties to that agreement.

"Deceptive and illegal mortgage servicing practices have pushed families into foreclosure and devastated communities across the nation," said CFPB Director Richard Cordray. "Today's action will help homeowners and consumers harmed by SunTrust's unlawful foreclosure practices. The Consumer Bureau will continue to investigate mortgage servicers that mistreat consumers, and we will not hesitate to take action against any company that violates our new servicing rules."

SunTrust also allegedly violated mortgage origination practices between January 2006 and March 2012 by underwriting mortgages for insurance from the Federal Housing Administration that did not meet the agency's requirements, according to documents provided by the Justice Department.  A second and parallel mortgage lending court filing announced by DOJ will require SunTrust to pay a $418 million penalty.

SunTrust is a wholly-owned subsidiary of Atlanta-based SunTrust Banks, Inc. and is headquartered in Richmond, Virginia.  The bank told its stockholders last October it had set aside $1.2 billion to settle the probe.  

CFPB said the settlement administrator will be in touch with eligible consumers who lost their homes to foreclosure between Jan. 1, 2008 and Dec. 31, 2013.  Consumers who are interested in loss mitigation should contact SunTrust Mortgage.