Atlanta-based SunTrust Banks has reached a nearly $1 billion joint state and federal settlement to address faulty mortgages it made leading up to the recent financial and housing crisis.
The three-year settlement provides direct payments to Georgia borrowers for past foreclosure problems, loan modifications and other relief for borrowers in need of assistance as well as heightened mortgage servicing standards and the selection of an independent monitor, according to a press release from state Attorney General Sam Olens.
The agreement includes $500 million in consumer relief for those at risk of default and an additional $418 million to resolve allegations it violated standards for loans insured by the Federal Housing Administration.
Like other big financial institutions, including Bank of America, Wells Fargo and Citigroup, SunTrust has had to address risky mortgages it underwrote during the housing bubble leading up to the economic crisis of 2008.
The agreement’s mortgage servicing terms mirror the $25 billion National Mortgage Settlement reached in 2012 between the federal government, 49 state attorneys general and the five largest national mortgage servicers.
SunTrust announced a principle agreement in October 2013 with the Justice Department, Department of Housing and
Urban Development and other government agencies.
“As we said when these agreements in principle were announced, we are pleased to have resolved these legacy mortgage matters,” SunTrust CEO William Rogers said in a statement.
SunTrust said it had made significant improvements to its mortgage underwriting processes since the crisis, including increased training and the establishment of a center of specialization to underwrite all government-insured mortgages to reduce error rates.
The bank will, under the agreement, be required to provide certain Georgia borrowers with loan modifications such as principal reductions and refinancing for underwater mortgages as well as change how it services mortgage loans and handles foreclosures, using it as only a last resort.
SunTrust can decide how many loans and which loans to modify but must meet certain minimum targets.
Additionally, Georgia borrowers whose loans were serviced by SunTrust who lost their home to foreclosure between Jan. 1, 2008, and December 31, 2013, will be eligible for payments from a national $40 million fund.
A spokesman for the Georgia attorney general’s office said approximately 9,800 borrowers in the state were foreclosed on by SunTrust during this period and will be contacted on how to qualify for payments. He added that the number of borrowers elligible for other types of relief through this settlement — including those in default, those in imminent danger of default or those underwater — is likely much higher.
The National Mortgage Settlement’s independent monitor, Joseph Smith Jr., will oversee SunTrust agreement compliance. Smith will oversee implementation of the new standards under the agreement, levy penalties of up to $1 million per violation and issue regular public reports that identify any issues with a servicer not complying with the new standards.
Current borrowers serviced by SunTrust can contact the company directly with questions at 800-634-7928.