SunTrust Mortgage Inc. has agreed to pay up to $320 million to resolve allegations that it misled customers seeking loan modifications under a government program established to help homeowners avoid foreclosure, the company and federal authorities said Thursday.
According to a statement of facts filed with the settlement, the Richmond, Virginia, mortgage arm of Atlanta-based SunTrust Banks Inc., misrepresented or omitted information to borrowers participating in the federal Home Affordable Modification Program and failed to process applications in a timely manner. The company is making up to $274 million available to thousands of customers who suffered financial harm.
Government-sponsored enterprises Fannie Mae and Freddie Mac will receive $10 million, and $16 million will go to law enforcement agencies working on mortgage fraud and related matters. SunTrust also agreed to fund $20 million in grants to housing counseling agencies and to improve its administration of the loan modification program.
"SunTrust has done the right thing by agreeing to this novel package of restitution, remediation, and prevention, which represents a significant victory not only for SunTrust customers, but also for Americans who will receive counseling and other assistance when faced with financial challenges," U.S. Attorney Timothy Heaphy said in a written statement.
Settlement documents say delays in processing HAMP applications prevented some borrowers from pursuing other options to save their homes. Customers also were charged excessive interest and were improperly reported to credit bureaus as delinquent.
"SunTrust's administration of the HAMP program caused serious harm to the very Americans it was supposed to help,'' the statement of facts says. It also credits SunTrust with cooperating in the investigation and says the executives and managers responsible for the conduct in 2009 and 2010 are no longer with the company.
"We recognize that there were deficiencies in our administration of HAMP during the recession, and 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," SunTrust Mortgage CEO Jerome Lienhard said in a news release.
Last month, SunTrust and the Justice Department also agreed to a $1 billion settlement to resolve allegations that the company underwrote and endorsed faulty mortgage loans between 2006 and 2012.