Attorney General Kamala D. Harris Announces $550 Million Joint State-Federal Settlement with SunTrust
SAN FRANCISCO – Attorney General Kamala D. Harris today announced a $550 million joint state-federal settlement with mortgage lender and servicer SunTrust Mortgage Inc. to address mortgage origination, servicing, and foreclosure abuses.
The three-year settlement provides direct payments to California borrowers for past foreclosure abuses, loan modifications and other relief for borrowers in need of assistance, and tough new mortgage servicing standards, and grants oversight authority to an independent monitor.
“We are recovering from the foreclosure crisis in California, but for too many families the legacy created by this crisis has been an enduring struggle to stay in their homes,” Attorney General Harris said. “This settlement will help California’s homeowners with Sun Trust mortgages get loan modifications and work to regain their financial footing.”
The settlement includes California and 48 other states, the District of Columbia, the U.S. Department of Justice (DOJ), the U.S. Department of Housing and Urban Development (HUD), and the Consumer Financial Protection Bureau (CFPB).
Today’s agreement requires SunTrust to provide all borrowers nationwide with $500 million worth of loan modifications and other relief. SunTrust may fulfill its obligations in many ways, including principal reductions and refinancing for underwater mortgages. Because SunTrust receives only partial settlement credit for many types of loan modifications, the settlement will provide relief to borrowers that will exceed the overall minimum amount.
More information about the loan modification process will be released at a later date, though current borrowers with loans serviced by SunTrust can contact the company directly with questions at 1-800-634-7928.
Approximately 4,733 Eligible California borrowers whose loans were serviced by SunTrust and who lost their home to foreclosure from January 1, 2008 through December 31, 2013 and encountered servicing abuse will be eligible for a payment from the national $40 million fund for payments to borrowers. The borrower payment amount will depend on how many borrowers file claims.
Eligible borrowers will be contacted by the settlement administrator about how to qualify for payments.
The settlement requires SunTrust to substantially change how it services mortgage loans, handles foreclosures, and ensures the accuracy of information provided in federal bankruptcy court. The terms will prevent past foreclosure abuses, such as robo-signing, improper documentation and lost paperwork.
The settlement creates dozens of new consumer protections and standards, including:
- Making foreclosure a last resort by first requiring SunTrust to evaluate homeowners for other loss mitigation options;
- Restricting foreclosure while the homeowner is being considered for a loan modification;
- New procedures and timelines for reviewing loan modification applications;
- Giving homeowners the right to appeal denials;
- Requiring a single point of contact for borrowers seeking information about their loans and maintaining adequate staff to handle calls.
The agreement resolves potential violations of civil law based on SunTrust’s deficient mortgage loan origination and servicing activities. The agreement does not prevent state or federal authorities from pursuing criminal enforcement actions related to this or other conduct by SunTrust, or from punishing wrongful securitization conduct that is the focus of the Residential Mortgage-Backed Securities Working Group. Additionally, the agreement does not prevent any action by individual borrowers who wish to bring their own lawsuits.
The agreement will be filed as a consent judgment in the U.S. District Court for the District of Columbia.
SunTrust, headquartered in Richmond, Virginia, is a wholly-owned subsidiary of SunTrust Banks Inc., a bank and financial services company headquartered in Atlanta, Georgia.
The agreement’s mortgage servicing terms largely mirrors the 2012 National Mortgage Settlement (NMS) reached in February 2012 between the federal government, 49 state attorneys general, including California, and the five largest national mortgage servicers. That agreement has provided consumers in California with over $20 billion in relief, created tough new servicing standards, and implemented independent oversight.
Following the settlement, Attorney General Harris sponsored the California Homeowner Bill of Rights, a landmark package of legislation that restricts dual-track foreclosures, guarantees struggling homeowners a reliable point of contact at their lender and imposes civil penalties on fraudulently signed mortgage documents. In addition, homeowners may require loan servicers to document their right to foreclose. This legislation was signed by Governor Brown in July 2012 and took effect on January 1, 2013.