SunTrust, a mortgage lender and servicer, has agreed to pay nearly $1 billion to resolve allegations that it underwrote and endorsed faulty mortgage loans, according to government officials.
Connecticut, 48 other states, and the District of Columbia will share in $550 million of the settlement, according to state Attorney General George Jepsen.
The total $968 million settlement, reached with the U.S. Justice Department and other government agencies, will include money for homeowner relief and a requirement that the company improve its handling of mortgage loans and foreclosures. Approximately 150 foreclosed Connecticut borrowers may qualify for a cash payment. Eligible borrowers will be contacted with information about how to qualify.
Jepsen served as a member of the negotiating committee for this settlement. He also served as a member of the executive committee for the National Mortgage Settlement, a three-year agreement reached in 2012 with the attorneys general of 49 states and the District of Columbia, the federal government and five mortgage servicers. The National Mortgage Settlement provided more than $51 billion in relief to distressed homeowners nationwide, including approximately $450 million in benefits to nearly 6,300 Connecticut borrowers.
In announcing the latest agreement, authorities said SunTrust Mortgage, a Richmond, Va.-based mortgage lender and subsidiary of SunTrust Banks Inc., originated and underwrote bad loans between 2006 and 2012, gave borrowers false and misleading information about the status of foreclosure proceedings and charged unauthorized fees.
The company’s own internal documents showed an awareness of the problem, the government alleged, with one 2012 report referencing a “broken loan origination process.”
“SunTrust’s conduct is a prime example of the widespread underwriting failures that helped bring about the financial crisis” of 2008, U.S. Attorney General Eric Holder said in a statement. He said he expected similar cases in the future.
The three-year settlement will provide direct payments to certain borrowers for past foreclosure abuses as well as loan modifications and other relief for borrowers in need of assistance. The settlement includes tough new mortgage servicing standards for SunTrust and grants oversight authority to an independent monitor.
SunTrust chief executive William Rogers Jr. said in a statement that the institution is pleased to have resolved the allegations. He said the company has made improvements to its mortgage underwriting processes and internal controls, including increased training.
“This settlement with SunTrust continues the important work of the 2012 National Mortgage Settlement, which has helped thousands of struggling homeowners in Connecticut, and the settlement reached last year with mortgage servicer Ocwen,” Jepsen said in a statement. “While we cannot prevent every home foreclosure, attorneys general from across the country – in partnership with the federal government – continue to hold servicers accountable and to provide relief to families wherever possible.”
In Connecticut, Assistant Attorney General Joseph Chambers and Matthew Budzik, head of the Finance Department, assisted Jepsen.