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SunTrust, US regulators reach settlement on abusive mortgage practices

BBR Staff Writer Published 18 June 2014

SunTrust Banks has reached a definitive agreement with the US Department of Justice (DoJ) and the Department of Housing and Urban Development (HUD) to settle allegations of improper mortgage origination and servicing practices.

SunTrust

Having signed agreements in principle in October 2013, the company's subsidiary SunTrust Mortgage has now agreed to pay $968m, which includes consumer relief of $500m for homeowners and borrowers, and a cash payment of $468m, to address mortgage origination, servicing, and foreclosure abuses.

US Attorney General Eric Holder said SunTrust's conduct represents a prime example of the widespread underwriting failures that helped bring about the financial crisis.

US Justice Department Civil Division assistant attorney general Stuart Delery said SunTrust's irresponsible federal housing administration (FHA) lending practices caused grievous harm to homeowners and the housing market, while wasting hundreds of millions of dollars in taxpayer funds.

"As this settlement demonstrates, we will continue to hold accountable financial institutions that misuse public funds and ruin the lives of hardworking Americans in the pursuit of their own financial interests," Delery added.

SunTrust Banks chairman and chief executive officer William Rogers said the company is pleased to have resolved legacy mortgage matters and looks forward to of provide high quality products and service to clients.

"Like most major financial institutions, we are addressing issues related to mortgage matters stemming from the financial crisis and recession period," Rogers added.

SunTrust is accused of originating and underwriting FHA-insured mortgages that violated its obligations as a participant in the FHA insurance program between January 2006 and March 2012.

In addition, the Georgia-based company has admitted that it failed to carry out an effective quality control program to identify non-compliant loans, and report to HUD even after identifying the defective loans.

Image: SunTrust Banks has agreed to pay $968m to settle probe into improper mortgage origination practices. Photo: Ildar Sagdejev.