By Dow Jones Business News,
February 24, 2014, 07:55:00 PM EDT
By Andrew R. Johnson
SunTrust Banks Inc. may face "substantial penalties" resulting from an ongoing federal-government mortgage probe,
the Atlanta-based lender said Monday in a regulatory filing.
The company also disclosed a new mortgage investigation by the U.S. Department of Justice concerning loans SunTrust
sold to government-backed firms Fannie Mae and Freddie Mac.
SunTrust had previously disclosed that the U.S. Attorney's Office for the Western District of Virginia and Office
of the Special Inspector General for the Troubled Asset Relief Program were investigating the company concerning its
participation in a federal mortgage-assistance program.
The bank said Monday in its annual report filed with the Securities and Exchange Commission that the agencies have
indicated the plan to "pursue some form of action and may impose substantial penalties" on SunTrust. The agencies'
investigation focused on the whether the bank "harmed borrowers and violated civil or criminal laws by failing to
properly process applications for" loan modifications under the Home Affordable Modification Program, or HAMP.
Separately, the DOJ notified SunTrust in January that it is investigating the bank's origination and underwriting
of mortgages it sold to Fannie and Freddie. The investigation is in its early stages, the filing said.
A spokesman for SunTrust declined to comment. Representatives of the DOJ, U.S. Attorney's Office and Special
Inspector General's Office for TARP couldn't immediately be reached for comment late Monday.
While many of the regulatory actions taken against lenders over mortgage activities had been targeted against the
largest U.S. banks, federal authorities have also been focusing on regional lenders like SunTrust. Other midsize banks,
such as Fifth Third Bancorp and Regions Financial Corp., have disclosed regulatory probes in the last several months.
SunTrust in October said it would pay more than $1 billion in a broad set of agreements with federal regulators
over alleged mortgage violations. As part of the deal, the bank said it had reached agreements in principle with
regulators that would call for the SunTrust to join a national mortgage settlement reached in 2012 with the five largest
In its filing Monday, SunTrust said it is continuing to negotiate definitive terms for such matters, though noted
it may not be able to reach a final agreement with the Federal Housing Administration over matters involving the agency.
If it fails to reach a final agreement over those matters, the government could sue the company alleging
deficiencies in its origination of FHA-insured loans, the company said.
The bank raised its estimate for the amount of money it could lose from various legal matters above funds it has
already set aside for such matters to as much as $300 million. It had previously estimated losses of as much as $250
million in a November filing.
Write to Andrew R. Johnson at firstname.lastname@example.org
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