Maryland will receive $33 million from a nearly $1 billion joint state-federal settlement reached with SunTrust Mortgage Inc. over past problems with its mortgage servicing and foreclosure procedures, the Maryland Attorney General's office announced Tuesday.
The money is supposed to provide funding for loan modifications and other forms of relief over a three-year period. The state also expects about 1,200 Maryland borrowers to be eligible to apply for a one-time payment from a $40 million national fund. The fund is for borrowers whose loans were serviced by SunTrust and lost their homes to foreclosure between 2008 and 2013.
Maryland is due to receive the third largest amount of money of any state from the $968 million agreement, which involves 49 states and Washington, D.C., as well as three federal agencies, said a spokesman for the attorney general. The agreement includes a $418 million fine to resolve "potential liability" for originating and underwriting federally-insured loans that did not meet Federal Housing Administration requirements, as well as failing to identify and report "defective" loans to the government.
"This agreement holds SunTrust accountable for past practices that were unacceptable, providing direct relief to thousands of Maryland borrowers," said Maryland Attorney General Douglas F. Gansler in a statement. Gansler is running to be the Democratic nominee for governor.
"SunTrust's conduct is a prime example of the widespread underwriting failures that helped bring about the financial crisis," said U.S. Attorney General Eric Holder said in a statement. "We will continue to hold accountable financial institutions that, in the pursuit of their own financial interests, misuse public funds and cause harm to hardworking Americans. We expect that there will be more cases like this to come."
As part of the settlement, SunTrust is to abide by compliance measures similar to the terms included in the landmark $25 billion national mortgage settlement reached in 2012 with the nation's five biggest banks. In December, Ocwen Financial Corp. and subsidiary Ocwen Loan Servicing in December also announced a $2.1 billion deal to resolve misconduct related to its handling of loans.
SunTrust Mortgage Inc., based in Virginia, is a wholly owned subsidiary of SunTrust Banks Inc., which is headquarted in Atlanta. The company, which announced the broad outlines of the deal last October, said in a statement it has improved its practices, added training and establishing a center focused on government-insured loans.
"We are pleased to have resolved these legacy mortgage matters," SunTrust Banks Chairman and CEO William H. Rogers Jr. said in a statement. "Like most major financial institutions, we are addressing issues related to mortgage matters stemming from the financial crisis and recession period."Copyright © 2014, The Baltimore Sun