SunTrust Banks, Inc.
) has announced the resolution of one more mortgage-related probe
within 20 days of announcing
pertaining to faulty mortgage servicing as well as lending and
foreclosure practices. The latest settlement by SunTrust Mortgage,
Inc., the mortgage division of the company, resolves the
allegations of misleading customers seeking loan modifications
under the Home Affordable Modification Program (HAMP).
Under the settlement, announced by the U.S. Attorney for the
Western District of Virginia, SunTrust will pay up to $320 million.
The misleading business conducts occurred between Mar 2009 and Dec
SunTrust allegedly misrepresented information to customers
participating in the HAMP. The company was also accused of failing
to process loan modification applications in a timely manner. This
prevented the borrowers from undertaking other options to avoid
Further, SunTrust damaged the credit scores of several borrowers by
misrepresenting them as delinquent to the credit bureaus. Moreover,
excessive interest was charged from the customers.
Of the total settlement amount, SunTrust will be paying a maximum
of $274 million, as customer relief. Further, the bank will provide
$20 million to the housing counseling agencies. Of the remaining
amount, $10 million will go to
) and $16 million to the law enforcement agencies.
SunTrust had revealed that it was under probe for the
above-mentioned allegations in Aug 2013. Owing to this settlement,
the company will incur a pre-tax charge of $204 million in
Also, as SunTrust revealed separately in the regulatory filings,
following the divestiture of its asset management subsidiary,
RidgeWorth Capital Management, Inc., it will be recording a pre-tax
gain of $105 million. Hence, the bank will incur a charge of 13
cents per share in the second quarter as a result of the combined
financial impact of these two transactions.
Though SunTrust has resolved the mortgage-related probes, it still
faces investigation by the Department of Justice over mortgages
sold to Fannie Mae and Freddie Mac. Hence, the litigation overhang
will persist in the next few quarters.
Currently, SunTrust carries a Zacks Rank #3(Hold). A better-ranked
major regional bank is
) with a Zacks Rank #2 (Buy).
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