Thursday, July 3, 2014

SunTrust agrees to $320M settlement over mortgage modifications

Atlanta-based SunTrust Banks has agreed to a settlement of up to $320 million with federal authorities over the bank's handling of home loans under a federal mortgage-assistance program, according to a deal announced Thursday.

The settlement resolves claims involving the Home Affordable Modification Program, launched in response to the housing crisis to reduce monthly mortgage payments for struggling borrowers and prevent foreclosure. It is part of the Troubled Asset Relief Program, also known as the federal bailout.

Federal authorities began investigating SunTrust following complaints that it misled homeowners who sought assistance under HAMP from SunTrust, according to securities filings.

According to the complaints, SunTrust made "misrepresentations and omissions" to homeowners, such as on how long SunTrust would take to decide whether borrowers qualified for HAMP.

"We recognize that there were deficiencies in our administration of HAMP during the recession," Jerome Lienhard, president of SunTrust Mortgage, said in a statement, adding that the lender has made improvements to its internal processes.

SunTrust has agreed to provide up to a maximum of $274 million in consumer remediation, $20 million for housing counseling for homeowners, $10 million in restitution to Fannie Mae and Freddie Mac and a cash payment of $16 million to the U.S. Treasury.

The settlement will result in a $204 million pre-tax charge that will affect SunTrust's second-quarter results.

SunTrust is the fifth-largest bank by deposits in the Charlotte metropolitan area.