By Dow Jones Business News, October 10, 2013, 06:05:00 PM EDT
SunTrust Banks Inc. ( STI ) is paying more than $1 billion to settle federal allegations of mortgage violations, in the
latest move by a bank to put behind it costly legal issues stemming from the financial crisis.
The Atlanta-based bank said Thursday it will pay $468 million in cash and provide $500 million in relief to borrowers
under agreements with the Justice Department, Department of Housing and Urban Development and Federal Reserve. It is
also paying more than $200 million to resolve claims with Fannie Mae (FNMA) and Freddie Mac (FMCC).
A portion of the money--$160 million--will be paid to resolve claims that SunTrust mishandled borrowers' loans. As
part of that deal, SunTrust is joining five other mortgage servicers who reached a landmark $25 billion settlement with
49 states and federal regulators last year addressing allegations of "robo-signing" foreclosure documents.
"SunTrust is pleased to have resolved a number of legacy mortgage matters," William Rogers Jr., chairman and chief
executive of SunTrust, said in a statement Thursday. "These settlements reduce uncertainty, further improve our risk
profile, and enhance our ability to focus on future growth."
SunTrust said it plans to make the $160 million payment tied to the national mortgage settlement partly in the form of
A HUD spokeswoman declined to comment, and Justice Department representatives couldn't immediately be reached
SunTrust is the first bank to join the national mortgage settlement since the deal was announced in February 2012 with
Bank of America Corp. (BAC), Citigroup Inc. (C), J.P. Morgan Chase & Co. (JPM) and Ally Financial Inc.
The settlement introduced more than 300 new servicing standards that required the banks to improve their communication
with borrowers who are seeking loan modifications.
At the time, officials suggested that other banks soon would sign on to the settlement, but SunTrust is the first to
do so. In addition to joining the national mortgage settlement, SunTrust also is paying to resolve civil and
administrative claims tied to loans insured by the Federal Housing Administration that the bank made between Jan. 1,
2006, and March 31, 2012.
SunTrust, which is scheduled to report third-quarter results on Oct. 18, said Thursday that the settlements are will
negatively hurt after-tax earnings by $179 million, or 33 cents per share.
The company said it incurred $323 million in operating losses in the quarter due to the government settlements.
SunTrust's shares were down 0.5% at $33.20 in after-hours trading Thursday.
The bank said it also reached deals with government-sponsored mortgage firms Freddie Mac and Fannie Mae over
allegations that it sold shoddy loans to the companies. SunTrust last week announced a $65 million settlement with
Freddie Mac. On Thursday, the bank said it also reached a $373 million settlement with Fannie Mae.
SunTrust's settlement with Freddie Mac was adjusted with $25 million in credits related to prior loan repurchases. The
bank's payment to Fannie Mae will be reduced by $145 million in credits.
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