Regulators: SunTrust Mortgage Must Provide $540M In Relief To Consumers Wronged By Shady Practices

Homeowners underwater with their mortgages and those who lost their homes to foreclosure could be seeing a bit of relief now that several federal agencies and state attorneys generals have filed an order requiring SunTrust Mortgage, Inc. to provide restitution for servicing wrongs.

The Consumer Financial Protection Bureau, the Department of Justice, Department of Housing and Urban Development and attorneys general from 49 states and the District of Columbia filed the proposed federal court order requiring the mortgage company to provide $500 million in loss-mitigation relief to underwater borrowers and to pay $40 million to approximately 48,000 consumers who lost their homes to foreclosure because of illegal practices the company took part in from 2008 to 2013.

The company will also have to pay $10 million to the federal government to settle its alleged systematic mortgaged servicing misconduct, including the use of robo-signing and illegal foreclosure practices.

Also on Tuesday, the Department of Justice announced that the company must pay $418 million in penalties in a parallel mortgaged lending filing.

As a mortgage servicer Virginia-based SunTrust is responsible for collecting payments from the mortgage borrower on behalf of the owner of the loan. However, regulators found substantial evidence that SunTrust engaged in misconduct putting thousands of people at risk of losing their homes.

Regulators allege that SunTrust took part in the following illegal practices:

  • Took advantage of homeowners with servicing shortcuts and unauthorized fees: SunTrust failed to promptly and accurately apply payments made by borrowers, and charged unauthorized fees for default-related services.
  • Deceived homeowners about foreclosure alternatives and improperly denied loan modifications: SunTrust failed to provide accurate information about loan modification and other loss-mitigation services, failed to properly process borrowers’ applications and calculate their eligibility for loan modifications, and provided false or misleading reasons for denying loan modifications.
  • Engaged in illegal foreclosure practices: SunTrust provided false or misleading information to consumers about the status of foreclosure proceedings where the borrower was in good faith actively pursuing a loss mitigation alternative also offered by SunTrust. The company also robo-signed foreclosure documents, including preparing and filing affidavits whose signers had not actually reviewed any information to verify the claims.

To settle the allegations of misconduct, the CFPB, federal agencies and attorneys general will require the company to correct its practices and provide relief to harmed consumers.

Over a three-year period, SunTrust must provide more than $500 million in loss mitigation relief to consumers, including reducing the principal on mortgages for borrowers who are at risk of default and reducing mortgage interest rates for homeowners who are current but underwater on their mortgages.

SunTrust must refund $40 million to consumers whose loans it services who lost their homes to foreclosure between January 1, 2008 and December 31, 2013.

The CFPB stipulates that all consumers who submit valid claims will receive an equal share of the $40 million. Those borrowers who receive payments can still seek additional relieve in the courts.

Additionally, SunTrust must establish additional homeowner protections, including protections for consumers in bankruptcy.

CFPB, Federal Partners, and State Attorneys General File Order Requiring SunTrust to Provide $540 Million in Relief to Homeowners for Servicing Wrongs [Consumer Financial Protection Bureau]