| July 3
July 3 SunTrust Banks Inc, a large U.S.
southeast regional bank, will pay as much as $320 million to
resolve a criminal probe into its mortgage unit's mismanagement
of a federal program designed to help struggling homeowners
avoid foreclosure during the recession.
The U.S. Department of Justice on Thursday said SunTrust
Mortgage Inc misled homeowners who sought relief through the
Home Affordable Modification Program about how long it would
take to review their qualifications, and how they would be
treated during "trial periods."
As a result, thousands of homeowners suffered harm including
damaged credit scores, excess interest payments, and an
inability to pursue other options to ease financial stress, the
Justice Department said.
The Atlanta-based bank said it "accepts and acknowledges
responsibility" for "numerous" shortfalls in administering HAMP
from March 2009 through December 2010.
The shortfalls included reporting as many as 75 percent of
trial-period customers who were current on their mortgages as
being delinquent, and once stacking backlogged, unopened HAMP
applications so densely that the floor beneath them buckled.
"SunTrust's mismanagement drove up foreclosures, decimated
individual credit and increased costs for hard-working men and
women across our nation," Attorney General Eric Holder said in a
"This resolution will provide much-needed restitution for
victims," he continued. "It will make available substantial
funds to help other homeowners avoid foreclosure. And it will
result in the kinds of systemic changes needed to ensure that
this will not happen again."
SunTrust on June 17 had reached a $968 million settlement
with the Justice Department over other questionable mortgage
In the latest accord, SunTrust will pay at least $179
million, and as much as $274 million, in restitution to harmed
It will also pay $10 million to government-controlled
mortgage finance companies Fannie Mae and Freddie Mac
, $16 million to combat mortgage fraud and $20 million
to counsel distressed homeowners. SunTrust will also boost
staffing and tighten oversight.
In a statement, SunTrust said it will take a $204 million
pre-tax charge in the just-completed quarter for the settlement.
"There were deficiencies in our administration of HAMP
during the recession," SunTrust's mortgage chief executive,
Jerome Lienhard, said. "Through the improvements we have made to
our internal processes and this restitution plan, we are
demonstrating our commitment to meet the high standards that we
set for ourselves and that our customers expect."
HAMP was part of the Obama administration's effort to
address the U.S. housing crisis.
SunTrust Mortgage originates about $30 billion of mortgage
loans a year, and its servicing portfolio totals nearly $140
billion, settlement papers show.
The latest SunTrust probe was handled by the office of U.S.
Attorney Timothy Heaphy in the Western District of Virginia.
SunTrust shares closed up 58 cents at $40.76 on Thursday.
(Reporting by Jonathan Stempel in New York; Editing by Leslie