Federal regulators have reached a $968 million settlement with SunTrust Mortgage over allegations of misconduct in mortgage servicing and illegal foreclosure practices.
SunTrust will be required to provide $500 million in relief to underwater borrowers, according to the proposed court order filed in federal court. The order also requires SunTrust to pay $40 million to about 48,000 consumers who lost their homes to foreclosure and $10 million to the federal government, the Consumer Financial Protection Bureau says.
SunTrust will also pay a $418 million penalty, in a parallel mortgage lending filing announced by Department of Justice.
"Today’s action will help homeowners and consumers harmed by SunTrust’s unlawful foreclosure practices," says CFPB Director Richard Cordray. "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."
What the settlement is about
The complaint alleges that Sunstrust:
- Failed to promptly apply payments made by borrowers and charged unauthorized fees for default-related services.
- Failed to provide accurate information about loan modifications and to properly process borrowers' applications, providing false or misleading reasons when denying loan modification requests.
- Engaged in illegal foreclosure practices, including robosigning foreclosure documents.
What SunTrust says about it
SunTrust says the settled claims are related to SunTrust's origination of FHA-insured mortgages and SunTrust's portion of the National Mortgage Servicing Settlement.
"Like most major financial institutions, we are addressing issues related to mortgage matters stemming from the financial crisis and recession period," William H. Rogers Jr., chairman and chief executive officer of SunTrust Banks said in a press release.
The lender claims it has made significant improvements to its mortgage underwriting process and internal controls.
What's in it for you?
The settlement requires SunTrust to:
- Provide $500 million in loss mitigation relief to consumers. That includes reducing the principal on mortgages for borrowers on the verge of default, and reducing the interest rates for homeowners who have kept up with their payments but owe more than what their houses are worth.
- Refund $40 million to consumers who lost their homes to foreclosure and had their loans serviced by SunTrust between Jan. 1, 2008 and Dec. 31, 2013. The $40 million will be split in equal shares among all consumers who submit valid claims.
The CFPB says that the settlement administrator will be in touch with eligible consumers who lost their homes to foreclosure during that period. Those who want to discuss their loss mitigation options may contact SunTrust at (800) 634-7928.