SunTrust to provide borrowers with loan modifications; foreclosed loans may be eligible for payments for past abuse

Wilmington – Attorney General Beau Biden today secured nearly $2 million for Delaware homeowners as part of a state-federal settlement with mortgage lender and servicer SunTrust to address mortgage origination, servicing, and foreclosure abuses.  Under the national $1 billion settlement, $550 million is earmarked for borrowers to provide relief to those who either lost their home to foreclosure or who are currently in distress under a SunTrust mortgage; SunTrust will also pay $418 million to the federal government to resolve its potential liability under the federal False Claims Act.

“We’re holding another financial institution accountable for unacceptable mortgage practices which contributed to the nationwide economic crisis that brought our economy to its knees,” Biden said.  “This action provides financial benefits to Delaware borrowers who were harmed by this bank’s foreclosure abuses and establishes tough new mortgage servicing standards it must follow to better protect borrowers.”

The agreement requires SunTrust to provide approximately $1.8 million to certain Delaware borrowers in the form of loan modifications or other relief.  The modifications may include principal reductions and refinancing for underwater mortgages.  More information about these loan modifications will be released at a later date, although current borrowers with loans serviced by SunTrust can contact the company directly with questions.

In addition, approximately 50 eligible Delaware borrowers whose loans were serviced by SunTrust and who lost their home to foreclosure from January 1, 2008 through December 31, 2013 and encountered servicing abuse may be eligible for cash payments from a separate $40 million national fund that is being established through today’s agreement.  Eligible borrowers will be contacted about how to qualify for payments. The amount each borrower receives will depend on how many borrowers file claims.

Today’s settlement with Biden, 48 other states and the District of Columbia, the U.S. Department of Justice, the U.S. Department of Housing and Urban Development, and the federal Consumer Financial Protection Bureau also establishes tough new mortgage servicing standards for the bank and subjects it to oversight by an independent monitor to ensure its compliance with the settlement.  Its servicing standards largely mirror the February 2012 National Mortgage Settlement between the states, federal government, and the nation’s five largest national mortgage servicers which provided consumers with more than $50 billion in direct relief, created tough new servicing standards, and implemented independent oversight.

Under the terms of today’s settlement SunTrust must substantially change how it services mortgage loans, handles foreclosures, and ensures the accuracy of information provided in federal bankruptcy court.  Each are aimed at ending past foreclosure abuses, such as robo-signing, improper documentation and lost paperwork.  Among the dozens of new consumer protections and standards are:

• Expanded protections for military servicemembers under the federal Servicemembers Civil Relief Act (SCRA) first championed by Biden in the February 2012 national mortgage settlement.  They include extending SCRA protections to all active servicemembers serving in a hostile fire zone and expanding mortgage assistance for servicemembers whose reassignments to new posts require them to relocate on short notice.
• 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.

Today’s settlement is the latest enforcement action taken by Biden in response to the mortgage foreclosure crisis.  Recent actions by Biden and his office include:

• In February 2012, Biden, 48 of his colleagues and the federal government signed a $25 billion settlement with the nation’s five largest mortgage-servicing banks (including JPMorgan). That settlement brought $11.7 million to the State and has, so far, meant $75 million in financial benefits to 3,000 Delawareans. It also included important new protections for America’s military personnel that Biden fought to include in the settlement.
• In July 2012, Biden secured important operational reforms from MERS – a national shadow mortgage registry at the heart of the mortgage crisis – in a settlement of a lawsuit he filed the year before. MERS’ inaccurate and unreliable records made it difficult if not impossible for homeowners to determine which financial institution owned their mortgage.
• In October 2012, Biden announced that an investigation by his office into allegations of “robo-signing” and other improper mortgage services provided by subsidiaries of Lender Processing Services, Inc. (LPS) led to the Florida-based company paying $250,000 to the State of Delaware.
• In January 2013, Biden, 12 of his colleagues and the federal government filed separate suits against Standard & Poor’s, charging the rating agency with violating state law by misrepresenting that its evaluations of structured finance securities were independent and objective when actually S&P’s analysis was influenced by its own financial interests. That suit is still pending.
• In November 2013, Biden announced that JPMorgan Chase will compensate Delaware nearly $20 million for selling mortgage-backed securities that were central to economic crisis.  The payment resolves allegations concerning the bundling and sale of mortgages to investors. The investments – bought by pension funds, mutual funds and other investors – were much riskier than advertised. The resulting losses were catastrophic for the economy.
• In December 2013, Biden secured nearly $7 million for Delaware from Ocwen Financial Corporation and its subsidiary, Ocwen Loan Servicing in a settlement following the states’  ongoing investigation into mortgage servicing and foreclosure abuse.  The agreement requires Ocwen to pay more than $6 million in direct financial relief for Delaware borrowers who have been harmed by the mortgage crisis

Today’s agreement, which will be filed as a consent judgment in the U.S. District Court for the District of Columbia, does not prevent state or federal authorities from pursuing criminal enforcement actions related to this or other conduct by SunTrust and does not prevent any action by individual borrowers who wish to bring their own lawsuits.

This matter was handled for Delaware by Deputy Attorney General Gillian Andrews in Biden’s Fraud and Consumer Protection Division.

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