June 19--Some at-risk SunTrust Bank Inc. borrowers in Tennessee may be able to keep their homes after the lender on Tuesday reached a $968 million agreement to settle allegations over abusive mortgage practices.
The Atlanta-based lender has agreed to make a cash payment of $418 million to the U.S. Department of Justice and to offer $550 million in consumer assistance.
Tennessee was a party to the settlement, along with 48 other states, the District of Columbia, and a host of other federal agencies, including the U.S. Justice Department and Consumer Financial Protection Bureau.
"We expect that the SunTrust settlement will be more beneficial to Tennessee than all but a handful of other states because of SunTrust's heavy presence in Tennessee," said Matt Pulle, an assistant attorney general and the state's mortgage settlement coordinator. "We urge homeowners at risk of foreclosure to contact SunTrust and see what options they have available. They can also contact our office if they feel they have been treated unfairly."
SunTrust is the third-largest bank by deposit market share in Memphis, behind First Tennessee Bank and Regions Bank, according to the Federal Deposit Insurance Corp.
According to court records, state and federal officials said the lender didn't follow the rules for programs designed to spur lending and to help struggling homeowners, such as the Department of Agriculture's Rural Housing Service Guarantee Program; the Making Home Affordable Program; the Department of Veterans Affairs Loan Guarantee Service home loan program; and the Hardest Hit Fund.
In addition to federal allegations, state officials accused SunTrust of violating dozens of state consumer protection laws and said the lender's Richmond, Virginia-based mortgage unit misled consumers seeking mortgage assistance to avoid foreclosure. Pulle said the bank provided misleading information to consumers about the status of their foreclosure proceedings, failed to train its staff and to hire enough bankers to help consumers, lost customer paperwork or failed to respond to customers, and failed to establish processes for mortgage holders seeking loan modifications.
"The crux of the settlement is that they weren't following the rules," Pulle said. "No one is saying borrowers have a right to a modification, but the settlement gives them a right to a fair review and to receive good customer service and professional underwriting services."
SunTrust agreed to provide $550 million in consumer assistance without admitting to any wrongdoing.
Under the settlement terms, SunTrust borrowers who have missed mortgage payments or have mortgages that exceed 31 percent of their before-tax monthly income, may qualify for mortgage assistance.
More than 2,000 Tennessee borrowers -- whose loans were serviced by SunTrust and encountered servicing abuse and who also lost their homes to foreclosure from Jan. 1, 2008, through Dec. 31, 2013 -- are eligible for direct payments.
This settlement parallels a $25 billion national settlement in 2012 with the nation's five largest mortgage servicers and a coalition of state attorneys general and federal agencies. Since the banks involved in that settlement only serviced the loans, and did not hold the loans on their own books, investors bore the brunt of penalties, rather than the banks, critics pointed out.
In some cases, states that received direct payments to help homeowners diverted the funds to plug holes in general funds, with little oversight.
The SunTrust settlement does not include any direct payments to Tennessee or any other states. Those with questions should call 855-876-7283.
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