SunTrust Mortgage Inc. has reached a nearly $1 billion settlement with the federal government and 49 states, including Arkansas, after an investigation into allegations of misconduct by the lender.
Attorney General Dustin McDaniel said customers in the state would receive about $450,000 to refinance and modify loans but that many consumer protections required under the settlement were already state law. Eligible borrowers who had loans through SunTrust and lost their homes between Jan. 1, 2008, and Dec. 31, will be contacted about how to receive the assistance.
"Attorneys general from across the country have been working together for several years now to hold accountable those who are responsible for deceiving consumers and contributing to our nation's recent housing crisis," McDaniel said in a written statement. "This settlement is another example of that effort, which will continue. We are committed to pursuing legal action against mortgage lenders and servicers that engage in abusive practices."
McDaniel said that the Legislature took steps during the 2011 session to provide more information for homeowners facing foreclosure.
Act 885 of 2011, sponsored by former state Rep. Tiffany Rogers, D-Stuttgart, requires mortgage servicers, which manage mortgages and receive loan payments, to provide certain documents, including information on loan modification programs, to homeowners when a foreclosure notice is issued. The bill was part of McDaniel's legislative package that year.
Under the terms of the settlement, the company will also be prohibited from "robosigning" documents, McDaniel said.
McDaniel and the U.S. Justice Department announced the settlement in news releases last week.
The Justice Department said that under the terms of the settlement, the company agreed to pay $500 million over the next three years to reduce the principal on mortgages in risk of default and reduce interest rates. The company was also required to pay $418 million for its "potential liability" for "underwriting loans that violated its obligations as a participant in the Federal Housing Administration insurance program," the department said.
SunTrust also agreed to pay $50 million to remedy its servicing practices, with the majority of that money going to borrowers and homeowners, according to the department.
The department said SunTrust admitted to underwriting Federal Housing Administration-insured loans between January 2006 and March 2012 that did not meet requirements under the program and that it failed to deploy quality control measures to identify noncompliant loans. Several audits and documents made available to the company's management found flaws in its processes and showed as many as half its mortgages were noncompliant, according to the department.
Cindy Murphy, a spokesman for McDaniel, said the settlement was filed June 17 in the U.S. District Court for the District of Columbia, but has not yet been approved by the court. The investigation "continued the efforts in the National Mortgage Settlement," Murphy said in an email.
The National Mortgage Settlement was a $25 billion state and federal agreement reached in February 2012 with five of the largest mortgage servicers in the country -- Bank of America Corp., J.P. Morgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc. -- over allegations of fraud and abuse.
The state received about $39 million in that settlement, with the bulk of the money going toward similar purposes as Tuesday's agreement.
SunTrust is based in Richmond, Va., and is a subsidiary of SunTrust Banks Inc., a financial services company based in Atlanta.
William H. Rogers Jr., chairman and chief executive officer of SunTrust Banks Inc., said the company "has a long history of providing high quality products and service to clients, while promoting financial well-being in the communities we serve."
"[W]e are pleased to have resolved these legacy mortgage matters. Like most major financial institutions, we are addressing issues related to mortgage matters stemming from the financial crisis and recession period," Rogers said in a written statement.
Metro on 06/25/2014