SunTrust Banks has agreed to pay $968 million to settle a federal probe into its mortgage practices from before and after the housing crash, the U.S. Department of Justice said Tuesday.
SunTrust, which has nearly 1,500 bank branches across the southeastern U.S., had been fighting allegations of improper mortgage originations as well as servicing and foreclosure abuses. The settlement puts an end to investigations by several federal agencies, including the DOJ, as well as the Department of Housing and Urban Development (HUD) and the Consumer Financial Protection Bureau (CFPB).
As part of the settlement, SunTrust (STI) admitted that it violated the law between January 2006 and March 2012 by originating and underwriting Federal Housing Agency-insured mortgages that did not meet the agency’s requirements. The bank also failed to identify many loans that failed to meet standards and then neglected to report to HUD when it did find problematic loans. A large portion of SunTrust’s payment, $500 million, will go toward providing direct relief to borrowers and homeowners through reducing the principal for borrowers who are at risk of default and reducing interest rates for those who are current but underwater on their mortgages.
“SunTrust’s conduct is a prime example of the widespread underwriting failures that helped bring about the financial crisis,” U.S. Attorney General Eric Holder said in a statement. “From mortgage origination to servicing to securitization, the Department of Justice is attacking every facet of conduct that led to the Great Recession.”
The Justice Department said the terms of the agreement with SunTrust are in line with the $25 billion National Mortgage Settlement, a 2012 deal struck between the federal government and five of the nation’s largest mortgage providers to resolve similar claims of servicing abuses where banks used a practice known as “robo-signing” to force home foreclosures.
SunTrust announced the framework of its settlement in October, saying at the time that the money set aside for the payments resulted in a $323 million charge against the company in the third quarter of 2013.
In a statement on Tuesday, SunTrust CEO William Rogers, Jr. Said the bank is pleased to have resolved the federal probes. “Like most major financial institutions, we are addressing issues related to mortgage matters stemming from the financial crisis and recession period,” he said.