In a weekend interview conducted on Sunday July, 6, 2014, I discussed this weeks developments in the federal investigation into the business practices of SunTrust Banks, with Brian McCaffrey, a Queens New York foreclosure attorney.
On Thursday federal prosecutors and SunTrust Banks reached a settlement in a criminal investigation into the bank’s failure to timely approve loan modifications. The bank will pay as much as $320 million for a combination of consumer relief and housing counseling services.
In a press release issued by Suntrust they outlined the agreement.
Under the agreement, SunTrust Mortgage has agreed to provide $179 million in consumer remediation (up to a maximum of $274 million), $20 million to fund housing counseling for homeowners, $10 million paid toward restitution to the Federal National Mortgage Association and Federal Home Loan Mortgage Corporation, and a cash payment of $16 million to the United States Treasury.
The company will incur a $204 million pre-tax charge in the second quarter of 2014 as a result of this agreement. The company, SunTrust Banks, Inc.(NYSE:STI) traded lower on the news but picked up pace and closed higher on Thursday.
Jerome Lienhard, president and chief executive officer of SunTrust Mortgage, Inc. responded by saying; "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."
The investigation by federal prosecutors into SunTrust’s compliance with the Home Affordable Modification Program (HAMP), conducted by investigators from several federal government agencies found that SunTrust, not only acted slowly in processing borrower applications for loan modifications but also made serious misrepresentations to homeowners.
Most of the money being paid by the bank under the settlement will go toward a fund to compensate borrowers who were shortchanged by SunTrust.
Critics have complained that this “settlement” like many other settlements with the big banks is simply a “pay to play” fee that will have little impact on the overall corporate philosophy at SunTrust. Borrowers have suffered at the hands of SunTrust as they have steadfastly refused to comply with HAMP guidelines said Brian McCaffrey a foreclosure attorney in Queens New York. “This settlement is nothing more than a slap on the wrist that will go the way of the many ‘consent orders’ the big banks have entered into that take away homeowners private cause of action”
According to McCaffrey, “this type of settlement allows banks to pay-off the government and walk away from the liability incurred for their behavior. When a Homeowner runs into a situation where the big banks are violating a consent order their attorneys always raise the issue that homeowners are precluded from raising the issue.”
Until, the big banks are really held to account for their behavior they will quite simply act in a manner that brings them profit” said McCaffrey “While the possibility exist that they can make billions of dollars by violating the law and simply pay a relatively small portion of those profits to the government in ‘pay to play’ agreements, they will never be dissuaded from their desire to reap profits at the expense of distressed homeowners”.