FRANKFORT—Attorney General Jack Conway announced last week that Kentucky has joined other states and the federal government in a $550 million 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 Kentucky borrowers for past foreclosure abuses, loan modifications and other relief for borrowers in need of assistance, tough new mortgage servicing standards, and grants oversight authority to an independent monitor.
The settlement includes 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).
“This settlement holds a major mortgage servicer accountable for its unacceptable past practices, and it provides direct relief to Kentucky borrowers,” Attorney General Conway said. “Additionally, SunTrust must treat its borrowers much more fairly because of the settlement’s tough servicing standards.”
SunTrust Agreement Closely Mirrors National Mortgage Settlement
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 Kentucky, and the five largest national mortgage servicers. That agreement has provided consumers nationwide with more than $50 billion in direct relief, created tough new servicing standards, and implemented independent oversight.
The agreement requires SunTrust to provide Kentucky borrowers an estimated $321,938 worth of loan modifications or other relief. The modifications, which SunTrust chooses through an extensive list of options, include principal reductions and refinancing for underwater mortgages. SunTrust decides how many loans and which loans to modify, but must meet certain minimum targets. 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.
Payments to Borrowers
Approximately 265 eligible Kentucky borrowers whose loans were serviced by SunTrust and who lost their home to foreclosure from Jan. 1, 2008 through Dec. 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 about how to qualify for payments.
New Mortgage Servicing Standards
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 National Mortgage Settlement’s independent monitor, Joseph A. Smith Jr., will oversee SunTrust agreement compliance. Smith served as the North Carolina Commissioner of Banks from 2002 until 2012, and is also the former Chairman of the Conference of State Banks Supervisors (CSBS). Smith will oversee implementation of the servicing standards required by the agreement; impose penalties of up to $1 million per violation (or up to $5 million for certain repeat violations); and issue regular public reports that identify any quarter in which a servicer fell short of the standards imposed in the settlement.
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, Ga.