Another U.S. financial firm has settled with the U.S. Justice Department to resolve a criminal investigation into its treatment of financially troubled U.S. homeowners.
SunTrust Mortgage Inc. agreed to a US$320 million settlement with U.S. authorities following an investigation of the firm’s administration of the Home Affordable Modification Program (HAMP). It says that SunTrust misled numerous customers who sought mortgage relief through HAMP. As a result, it alleges that thousands of homeowners who applied for a HAMP modification with SunTrust suffered serious financial harms.
“Instead of helping distressed homeowners, SunTrust’s mismanagement drove up foreclosures, decimated individual credit and increased costs for hardworking men and women across our nation,” said U.S. attorney general, Eric Holder.
To resolve the case, SunTrust agreed to pay $320 million, comprised primarily of $179 million in restitution that will be used to compensate borrowers for damage caused by its mismanagement of HAMP (it will also guarantee an additional $95 million for restitution, if needed). An independent claims administrator will be appointed to oversee compensation claims under the agreement.
It will also pay $16 million in forfeiture; and, $20 million to establish a fund for distribution to organizations providing counseling and other services to distressed homeowners. Additionally, the bank agreed to implement remedial measures aimed at preventing future problems.
“This resolution will provide much-needed restitution for victims. It will make available substantial funds to help other homeowners avoid foreclosure. And it will result in the kinds of systemic changes needed to ensure that this will not happen again,” added Holder.
The company will incur a $204 million pre-tax charge in the second quarter of 2014 as a result of this agreement.
“Resolving this legacy matter enhances our ability to focus on the future and support the continued housing recovery,” said Jerome Lienhard, president and CEO of SunTrust. “We recognize that there were deficiencies in our administration of HAMP during the recession, and through the improvements we have made to our internal processes and this restitution plan, we are demonstrating our commitment to meet the high standards that we set for ourselves and that our customers expect.”