CFPB, fed. partners, file complaint, proposed order requiring $550M from SunTrust

June 17, 2014

WASHINGTON (6/18/14)--The Consumer Financial Protection Bureau, along with the U.S. Department of Justice, Department of Housing and Urban Development and attorneys general in 49 states and the District of Columbia, filed a proposed federal court order requiring SunTrust Mortgage, Inc. to provide more than $540 million in relief to homeowners in response to servicing wrongs.

In addtion to the $540 million to homewners--$500 million in loss-mitigation relief to underwater borrowers and $40 million to approximately 48,000 consumers who lost homes to foreclosure--the order also requires SunTrust to provide $10 million to the federal government. A CFPB release says the parties filing the order uncovered substantial evidence that SunTrust was engaged in systemic mortgage servicing misconduct.

According to the CFPB, the joint complaint against Sun Trust "is not a finding or ruling that the defendants have actually violated the law. The proposed federal court order will have the full force of law only when signed by the presiding judge."

The complaint, filed in the federal district court in the District of Columbia, alleges that SunTrust:

  • Failed to promptly and accurately apply payments made by borrowers, and charged unauthorized fees for default-related services;
  • Failed to provide accurate information about loan modification and other loss-mitigation services, failed to properly process borrowers' applications and calculate their eligibility for loan modifications, and provided false or misleading reasons for denying loan modifications;
  • Provided false or misleading information to consumers about the status of foreclosure proceedings where the borrower was in good faith actively pursuing a loss mitigation alternative also offered by SunTrust; and
  • Robo-signed foreclosure documents, including preparing and filing affidavits whose signers had not actually reviewed any information to verify the claims.

Under the terms of the proposed order, SunTrust must:

  • Provide at least $500 million in relief to underwater borrowers over a three-year period, including reducing the principal on mortgages for borrowers who are at risk of default and reducing mortgage interest rates for homeowners who are current but underwater on their mortgages. If SunTrust fails to meet this requirement, it must pay a cash penalty equal to at least 125 percent of the shortfall.
  • Refund $40 million to consumers whose loans it serviced who lost their homes to foreclosure between Jan. 1, 2008 to Dec. 31, 2013. All consumers who submit valid claims will receive an equal share of the $40 million. Borrowers who receive payments will not have to release any claims and will be free to seek additional relief in the courts.
  • Pay $10 million to cover losses it caused to the Federal Housing Administration, Department of Veterans Affairs and the Rural Housing Service.
  • Establish additional homeowner protections, including protections for consumers in bankruptcy.

The agreement only covers SunTrust's violations before Jan. 10, 2014, when the CFPB's new mortgage servicing rules took effect. It does not prevent the CFPB from pursuing civil enforcement actions against SunTrust for violations of these rules. 

The Department of Justice also announced Tuesday SunTrust must pay a $418 million penalty in a parallel mortgage lending filing.