SunTrust Banks (“SunTrust”) reached a settlement with Federal prosecutors last week in which it agreed to a $320 million settlement for a combination of consumer relief and housing counseling services. SunTrust issued a press release this past weekend outlining the agreement. Specifically, it has agreed to pay $179 million in consumer remediation, $20 million to fund housing counseling for homeowners, $10 million as restitution to the Federal National Mortgage Association and Federal Home Loan Mortgage Corporation, and $16 million in cash to the United States Treasury.
This settlement is the result of an investigation by federal prosecutors in Virginia into SunTrust’s compliance with the Home Affordable Modification Program. The program allowed banks to modify loans for homeowners struggling to make their payments after the downturn. The prosecutors and investigators alleged that SunTrust made misrepresentations to homeowners and that it intentionally was slow to process borrower applications for mortgage modifications. For instance, prosecutors and investigators alleged that SunTrust misled homeowners about how long it would take to review their qualifications and how they would be treated during “trial periods.” The impact on the homeowners is substantial – thousands saw damage done to their credit scores, had to pay excess interest payments and were unable to look into other ways to ease their financial concerns.
Some have criticized the settlement as just another “pay to play” fee that won’t really modify SunTrust’s corporate philosophy. On the other hand, Timothy J. Heaphy, the United States Attorney for the Western District of Virginia, released a statement expressing that:
“SunTrust has done the right thing by agreeing to this novel package of restitution, remediation and prevention, which represents a significant victory not only for SunTrust customers, but also for Americans who will receive counseling and other assistance when faced with financial challenges.”
If SunTrust has in fact “done the right thing,” perhaps it will likewise do the right thing by ceasing its pursuit of what we believe to be largely baseless repurchase demands against originators/correspondent lenders.