$550M settlement reached in SunTrust Mortgage loan abuse case

SALT LAKE CITY – Francine A. Giani, executive director of the Utah Department of Commerce, announced Tuesday that the Utah Division of Consumer Protection and Utah Attorney General’s Office signed a $550 million multistate and federal settlement with mortgage lender and servicer SunTrust Mortgage Inc. to address mortgage origination, servicing and foreclosure abuses.

“With today’s settlement in place, SunTrust borrowers will be eligible for direct relief and the company will be held accountable for its unacceptable past practices,” Giani said, as quoted in a press release. “This is good news for consumers as SunTrust will be held to stricter loan servicing standards.”

The three-year settlement with Divisions of Consumer Protection in Utah and 48 other states, the District of Columbia, the U.S. Department of Justice and the U.S. Department of Housing and Urban Development provides direct payments to Utah borrowers for past foreclosure abuses; loan modifications and other relief for borrowers in need of assistance; tough new mortgage servicing standards; and the settlement grants oversight authority to an independent monitor.

“The Division of Consumer Protection is again thankful for the new team at the Utah Attorney General’s Office whose fresh perspective has brought a renewed focus on protecting consumer rights in Utah,” Giani said.

“We welcome the years of dedicated coordination from many states and agencies to protect consumers through the settlement of this case,” Attorney General Sean Reyes said. “Our partnership with the Division of Consumer Protection is key to safeguarding the citizens of Utah.”

SunTrust agreement closely mirrors National Mortgage Settlement

The agreement’s mortgage servicing terms largely emulate the 2012 National Mortgage Settlement (NMS) reached in February 2012 between the federal government, 49 state attorneys general, including Utah, and the five largest national mortgage servicers. That agreement has provided consumers nationwide with more than $55 billion in direct relief, created tough new servicing standards, and implemented independent oversight.

Loan modifications

The agreement requires SunTrust to provide Utah borrowers loan modifications or other relief. The modifications, which SunTrust chooses through an extensive list of options, include principal reductions and refinancing for underwater mortgages. SunTrust decides how many loans and which loans to modify but must meet certain minimum targets. Because SunTrust receives only partial settlement credit for many types of loan modifications, the settlement will provide relief to borrowers that will exceed the overall minimum amount.

More information about the loan modification process will be released at a later date, though current borrowers with loans serviced by SunTrust can contact the company directly with questions.

Payments to borrowers

Eligible Utah borrowers whose loans were serviced by SunTrust and who lost their homes to foreclosure between Jan. 1, 2008, and Dec. 31, 2013, and who encountered servicing abuse will be eligible for a payment from the national $40 million fund for payments to borrowers. The borrower payment amount will depend on how many borrowers file claims.

Eligible borrowers will be contacted about how to qualify for payments.

New mortgage servicing standards

The settlement requires SunTrust to substantially change how it services mortgage loans, handles foreclosures and ensures the accuracy of information provided in federal bankruptcy court.

The terms will prevent the repeat of past foreclosure abuses, such as robo-signing, improper documentation and lost paperwork.

The settlement creates dozens of new consumer protections and standards, including:

  • Making foreclosure a last resort by first requiring SunTrust to evaluate homeowners for other loss mitigation options
  • Restricting foreclosure while the homeowner is being considered for a loan modification
  • New procedures and timelines for reviewing loan modification applications
  • Giving homeowners the right to appeal denials
  • Requiring a single point of contact for borrowers seeking information about their loans and maintaining adequate staff to handle calls

Independent monitor

The National Mortgage Settlement’s independent monitor, Joseph A. Smith Jr., will oversee SunTrust agreement compliance. Smith served as the North Carolina Commissioner of Banks from 2002 until 2012 and is also the former chairman of the Conference of State Banks Supervisors. Smith will oversee implementation of the servicing standards required by the agreement; impose penalties of up to $1 million per violation, or up to $5 million for certain repeat violations; and issue regular public reports that identify any quarter in which a servicer fell short of the standards imposed in the settlement.

Additional terms

The agreement resolves potential violations of civil law based on SunTrust’s deficient mortgage loan origination and servicing activities. The agreement does not prevent state or federal authorities from pursuing criminal enforcement actions related to this or other conduct by SunTrust or from punishing wrongful securitization conduct that is the focus of the Residential Mortgage-Backed Securities Working Group. Additionally, the agreement does not prevent any action by individual borrowers who wish to bring their own lawsuits.

The agreement will be filed as a consent judgment in the U.S. District Court for the District of Columbia.

Submitted by Utah Department of Commerce

Resources

  • Additional information is available online or by contacting the Utah Division of Consumer Protection at telephone 801-530-6601

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