A second settlement in the past 30 days between SunTrust Mortgage Inc. and the U.S. government brings to more than $1 billion the amount it has agreed to pay to resolve allegations of poor lending practices. The latest agreement addresses mishandled modifications.
The first agreement was announced on June 17 between the Richmond, Va.-based company and the U.S. Department of Justice and resolved False Claims Act liability.
In that settlement, SunTrust was accused of abuses in its servicing, foreclosure processing and Federal Housing Administration lending.
The cost for that settlement was $968 million.
On Thursday, SunTrust said that it reached an agreement with the U.S. Attorney’s Office for the Western District of Virginia to resolve claims over its administration of the Home Affordable Modification Program.
An announcement from the Justice Department indicated that the settlement resolves a criminal investigation.
SunTrust said it first disclosed the HAMP investigation in August 2013, though it made a filing just this past February with the Securities and Exchange Commission disclosing the investigation.
According to the government, SunTrust misled borrowers on loans it serviced by providing material misrepresentations and omissions to borrowers in HAMP solicitations. It also failed to process HAMP applications in a timely manner.
“As a result of SunTrust’s mismanagement of HAMP, thousands of homeowners who applied for a HAMP modification with SunTrust suffered serious financial harm,” the government said.
The settlement will cost the lender $320 million.
The total includes $179 million in consumer remediation, though that could end up being as much as $274 million. An independent claims administrator will be appointed to communicate with impacted borrowers.
Another $20 million will be paid to a government-designated grant administrator to fund homeowner counseling
In addition, $10 million will be paid in restitution to Fannie Mae and Freddie Mac.
Finally, $16 million is being paid to the Department of the Treasury and will be utilized for law enforcement agencies working on mortgage fraud and other matters related to the misuse of Troubled Asset Relief Program funds.
A $204 million pre-tax second-quarter charge will be incurred as a result of the settlement.
The agreement also requires SunTrust to implement certain remedial measures designed to prevent the kind of problems that led to the investigation. This includes adding loss mitigation staff, monitoring the loan modification process and providing semi-annual reports about compliance with the agreement.
“Resolving this legacy matter enhances our ability to focus on the future and support the continued housing recovery,” SunTrust Mortgage President and Chief Executive Officer Jerome Lienhard said in the statement. “We recognize that there were deficiencies in our administration of HAMP during the recession, and through the improvements we have made to our internal processes and this restitution plan, we are demonstrating our commitment to meet the high standards that we set for ourselves and that our customers expect.”
