By Andrew R. Johnson
SunTrust Banks Inc. may face "substantial penalties" resulting
from an ongoing federal-government mortgage probe, the
Atlanta-based lender said Monday in a regulatory filing.
The company also disclosed a new mortgage investigation by the
U.S. Department of Justice concerning loans SunTrust sold to
government-backed firms Fannie Mae and Freddie Mac.
SunTrust had previously disclosed that the U.S. Attorney's
Office for the Western District of Virginia and Office of the
Special Inspector General for the Troubled Asset Relief Program
were investigating the company concerning its participation in a
federal mortgage-assistance program.
The bank said Monday in its annual report filed with the
Securities and Exchange Commission that the agencies have indicated
the plan to "pursue some form of action and may impose substantial
penalties" on SunTrust. The agencies' investigation focused on the
whether the bank "harmed borrowers and violated civil or criminal
laws by failing to properly process applications for" loan
modifications under the Home Affordable Modification Program, or
HAMP.
Separately, the DOJ notified SunTrust in January that it is
investigating the bank's origination and underwriting of mortgages
it sold to Fannie and Freddie. The investigation is in its early
stages, the filing said.
A spokesman for SunTrust declined to comment. Representatives of
the DOJ, U.S. Attorney's Office and Special Inspector General's
Office for TARP couldn't immediately be reached for comment late
Monday.
While many of the regulatory actions taken against lenders over
mortgage activities had been targeted against the largest U.S.
banks, federal authorities have also been focusing on regional
lenders like SunTrust. Other midsize banks, such as Fifth Third
Bancorp and Regions Financial Corp., have disclosed regulatory
probes in the last several months.
SunTrust in October said it would pay more than $1 billion in a
broad set of agreements with federal regulators over alleged
mortgage violations. As part of the deal, the bank said it had
reached agreements in principle with regulators that would call for
the SunTrust to join a national mortgage settlement reached in 2012
with the five largest mortgage servicers.
In its filing Monday, SunTrust said it is continuing to
negotiate definitive terms for such matters, though noted it may
not be able to reach a final agreement with the Federal Housing
Administration over matters involving the agency.
If it fails to reach a final agreement over those matters, the
government could sue the company alleging deficiencies in its
origination of FHA-insured loans, the company said.
The bank raised its estimate for the amount of money it could
lose from various legal matters above funds it has already set
aside for such matters to as much as $300 million. It had
previously estimated losses of as much as $250 million in a
November filing.
Write to Andrew R. Johnson at andrewr.johnson@wsj.com
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