SunTrust Fraud Claims Settled for $320 Million

(CN) - Resolving a criminal investigation, SunTrust Mortgage Inc. agreed Thursday pay the U.S. government $320 million.

The Justice Department said the new filings show that "SunTrust misled numerous mortgage servicing customers who sought mortgage relief through" the Home Affordable Modification Program (HAMP).

"Specifically, SunTrust made material misrepresentations and omissions to borrowers in HAMP solicitations, and failed to process HAMP applications in a timely fashion," the DoJ's statement continues. "As a result of SunTrust's mismanagement of HAMP, thousands of homeowners who applied for a HAMP modification with SunTrust suffered serious financial harms."

Of the $320 million settlement, $179 million will go compensate borrowers for damage caused by Suntrust's mismanagement of HAMP.

The Justice Department noted that borrowers eligible for such restitution must fall into one of eight predetermined categories of harm.

Suntrust could need to put another $95 million toward restitution if the $179 million fund runs out, according to the settlement.

Fannie Mae and Freddie Mac will SunTrust will also recover $10 million in restitution, and SunTrust faces $16 million in forfeiture to law-enforcement agencies working on mortgage fraud and other matters related to the misuse of funds from the Troubled Asset Relief Program (TARP).

The final $20 million in the settlement will fund organizations that provide counseling and other services to distressed homeowners.

"Specifically, SunTrust will pay this amount to a grant administrator selected by the government, which funds will in turn be awarded to housing counseling agencies and other non-profits devoted to consumer counseling and advocacy," the Justice Department said in a statement.

SunTrust must also implement certain remedial measures such as increasing loss-mitigation staff, monitoring its mortgage-modification process, and providing semiannual reports regarding compliance with the agreement.

The U.S. Attorney's Office for the Western District of Virginia led the investigation into Suntrust alongside the Office of the Special Inspector General for TARP, and the Office of the Inspector General for the Federal Housing Finance Agency (FHFA) and the U.S. Postal Inspection Service.

Last month Suntrust agreed to pay the federal government and 49 states $968 million to settle charges of abusive mortgage practices. Suntrust was the 14th largest mortgage originator in the country during the period at issue.

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