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SunTrust Wins Repurchase Legal Fight

A federal judge has handed SunTrust Banks Inc.’s mortgage unit a victory in a repurchase case involving a no-asset-verification program.

In September 2004, North Shore Bank FSB executed a correspondent purchase agreement with SunTrust Mortgage Inc.

North Shore was responsible for the accurate preparation and completion of the loan application packages and ensuring they complied with the terms of the agreement.

The agreement required North Shore to indemnify SunTrust against any all claims or losses resulting from a breach of the agreement.

One loan for $181,600 was acquired under the agreement in November 2006 for a $2,724 premium plus a $1,816 serviced-release premium. The mortgage was secured by a property in Sarasota, Fla.

The loan was closed on a no-ratio documentation program.

Fannie Mae acquired the mortgage the following month.

After the borrower defaulted, a forbearance agreement was reached. In addition, a December 2008 modification agreement raised the principal balance of the loan, extended the loan maturity date and modified the interest payments.

SunTrust received a repurchase demand on the loan from Fannie in November 2012 over missing asset documents — prompting it to conduct its own review and conclude the file had not been underwritten to its own guidelines.

SunTrust said verification that the $1,000 earnest money check had cleared had not been obtained. In addition, the source of funds used as closing cash hadn’t been verified.

SunTrust reportedly notified North Shore immediately of Fannie’s repurchase request
and advised North Shore to provide documentation that would persuade Fannie to withdraw the request. But instead of providing any documentation, North Shore claimed that after a review of the loan file, it was their “recollection that this was a no doc program that didn’t require asset verification.”

SunTrust followed that up with a letter to Fannie indicating that the “borrower satisfactorily met the EZ Option guidelines … According to the EZ Option guidelines, the borrower was not required to document the $1,201 of funds used to close the subject mortgage.”

But Fannie rejected that argument and sent a letter on Jan. 16, 2013, that SunTrust had to submit any appeal by the end of that month — though there was no appeal.

SunTrust didn’t advise North Shore of the appeal deadline.

SunTrust paid $248,621 to Fannie in April 2013 to satisfy the repurchase demand. The following month, a repurchase demand was sent to North Shore.

After conducting a short sale, a make-good payment of $183,151 was required to satisfy SunTrust.

Atlanta-based SunTrust took its uncollected repurchase demand to federal court in May 2014. A settlement conference the following December failed to resolve differences.

On Feb. 20, Senior U.S. District Judge
James R. Spencer granted SunTrust’s motion for summary judgment.

A motion for summary judgment filed by North Shore was denied.

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