Feb 25 SunTrust Banks Inc said it may
attract "substantial penalties" from on an ongoing
mortgage-related probe and also disclosed a new investigation by
the Department of Justice, according to a regulatory filing late
U.S. Attorney's Office for the Western District of Virginia
and Office of the Special Inspector General for the Troubled
Asset Relief Program have been investigating SunTrust concerning
its participation in a federal mortgage-assistance program.
The agencies have indicated the plan to pursue some form of
action and may impose substantial penalties on SunTrust, the
company said in the filing with the U.S. Securities and Exchange
The investigations focused on whether the bank harmed
borrowers and violated civil or criminal laws by failing to
properly process applications for loan modifications under the
Home Affordable Modification Program, or HAMP.
"STM continues to cooperate with the investigation and
believes that it has substantial defenses to the asserted
allegations," the bank said in its annual report filed with the
Additionally, SunTrust said the Department of Justice
notified it in January that it is investigating the bank's
origination and underwriting of mortgages SunTrust sold to
Fannie Mae and Freddie Mac.
The DOJ and STM have not yet engaged in any dialogue about
how this matter may proceed and no allegations have been raised
against STM and the investigation is in its preliminary stages,
SunTrust said in the filing.
SunTrust also said it is negotiating definitive settlement
terms for each of these matters and has certain substantive
disagreements with some of the positions being taken by the
The bank said the government may sue it alleging
deficiencies in its FHA loan origination practices in case
SunTrust is unable to reach a definitive settlement agreement.
Atlanta, Georgia-based SunTrust in October agreed to pay
nearly $1.2 billion to resolve investigations from several U.S.
authorities into its mortgage practices. The claims relate to
certain mortgage loans backed by the Federal Housing
Administration that the bank made between January 2006 and March
2012, and to problems with its mortgage servicing practices.