Volume 2014 - Number 24
June 19, 2014
SunTrust Mortgage has agreed to pay $968 million to the federal government and 49 state attorneys general to resolve allegations of improper FHA origination and servicing practices.
The company will pay $418 million to resolve potential liability under the False Claims Act for flawed FHA loans made from January 2006 through March 2012.
According to the complaint, SunTrust certified the loans even though they failed to meet FHA requirements and it had no effective quality-control plan in place to identify non-compliant loans. The bank also allegedly failed to report the non-compliant loans, even the defective ones it did identify.
SunTrust said it informed management between 2009 and 2012 about the poor state of its origination, underwriting and quality-control processes. As many as 50 percent or more of SunTrust’s FHA loans had failed to meet agency requirements.
As part of the agreement, SunTrust will provide $500 million in additional relief directly to borrowers and homeowners for the next three years. Relief will be in the form of principal reduction for borrowers facing default as well as lowering rates for underwater mortgages.