CFPB, Other Feds, and State AGs Announce $1 billion Mortgage Servicing Action

The CFPB and attorneys general in 49 states and the District of Columbia filed a proposed federal court order requiring SunTrust Mortgage, Inc. to provide $500 million in loss-mitigation relief to underwater borrowers. The order also requires SunTrust to pay $40 million to approximately 48,000 consumers who lost their homes to foreclosure and $10 million to the federal government.

The order addresses systemic mortgage servicing misconduct, including robo-signing and illegal foreclosure practices. SunTrust must pay an additional $418 million penalty in a parallel mortgage lending filing announced by the Department of Justice today.

In addition to the CFPB and DOJ, the case involved the Department of Housing and Urban Development (HUD).

“Deceptive and illegal mortgage servicing practices have pushed families into foreclosure and devastated communities across the nation,” said CFPB Director Richard Cordray. “Today’s action will help homeowners and consumers harmed by SunTrust’s unlawful foreclosure practices. The Consumer Bureau will continue to investigate mortgage servicers that mistreat consumers, and we will not hesitate to take action against any company that violates our new servicing rules.”

SunTrust is a mortgage lender and servicer headquartered in Richmond, Va., and is a wholly-owned subsidiary of Atlanta-based SunTrust Banks, Inc. As a mortgage servicer, it is responsible for collecting payments from the mortgage borrower on behalf of the owner of the loan. It handles customer service, collections, loan modifications, and foreclosures.

The CFPB, DOJ, HUD, and state attorneys general uncovered substantial evidence that SunTrust was engaged in systemic mortgage servicing misconduct. According to the complaint filed in the federal district court in the District of Columbia, SunTrust’s illegal practices put thousands of people at risk of losing their homes. Specifically, the complaint alleges that SunTrust:

• Took advantage of homeowners with servicing shortcuts and unauthorized fees: SunTrust failed to promptly and accurately apply payments made by borrowers, and charged unauthorized fees for default-related services.

• Deceived homeowners about foreclosure alternatives and improperly denied loan modifications: SunTrust 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.

• Engaged in illegal foreclosure practices: SunTrust 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. The company also robo-signed foreclosure documents, including preparing and filing affidavits whose signers had not actually reviewed any information to verify the claims.

The proposed SunTrust consent order is available at: http://files.consumerfinance.gov/f/201406_cfpb_consent-judgement_sun-trust.pdf

A copy of the SunTrust complaint filed today is available at: http://files.consumerfinance.gov/f/201406_cfpb_complaint_sun-trust.pdf