By Alan Zibel and Andrew R. Johnson
WASHINGTON--The U.S. government slapped SunTrust Banks Inc. with
$968 million in fines and consumer relief as the Atlanta lender
became the latest bank to settle allegations of abusive mortgage
practices.
The pact announced Tuesday is an outgrowth of an effort by the
government to penalize banks for what officials say were rampant
problems in their businesses of making mortgages and collecting
payments.
The settlement involves 49 state attorneys general and several
federal agencies.
SunTrust is the 14th largest U.S. mortgage lender by origination
volume, according to trade publication Inside Mortgage Finance. The
company announced tentative agreements last October with U.S.
authorities, including the Justice Department and Department of
Housing and Urban Development, and disclosed the payment amounts at
that time.
The bank agreed to pay a $418 million penalty and admitted it
didn't comply with lending standards mandated for loans insured by
the Federal Housing Administration. The Justice Department cited
internal SunTrust documents that show the bank's managers were
aware of poor internal controls on loan underwriting, as well as
high rates of error in loans backed by the FHA, which insures loans
against default.
The bank didn't admit or deny the government's other
allegations.
The company also committed to provide $500 million in relief to
consumers who owe more on their mortgages than their homes are
worth over three years. It also committed to refund $40 million to
around 48,000 consumers who lost their homes through
foreclosures.
"SunTrust's conduct is a prime example of the widespread
underwriting failures that helped bring about the financial
crisis," Attorney General Eric Holder said in a statement.
"We are pleased to have resolved these legacy mortgage
settlements," SunTrust Chairman and Chief Executive William Rogers
Jr. said in a statement.
As part of the agreement, SunTrust joined five other large banks
that reached a $25 billion pact with federal and state authorities
in 2012 that resolved allegations that banks filed faulty
foreclosure documents in proceedings against borrowers.
The agreement is to be overseen by Joseph Smith, the former
North Carolina bank regulator who oversees banks' compliance with
the 2012 mortgage settlement.
SunTrust still faces more regulatory scrutiny over its mortgage
practices.
The bank said in a February regulatory filing that it faces an
investigation by the Justice Department over mortgages that
SunTrust sold to government-sponsored enterprises Fannie Mae and
Freddie Mac. A spokeswoman for SunTrust said that matter wasn't
addressed in the settlement completed on Tuesday.
The pact also doesn't resolve an investigation by federal
authorities of SunTrust's participation in a U.S. Treasury
Department mortgage-modification program. The bank said in the
February filing that it could face "substantial penalties" stemming
from that probe.
Write to Alan Zibel at alan.zibel@wsj.com and Andrew R. Johnson
at andrewr.johnson@wsj.com
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