attorney general Mark R. Herring today announced that Virginia borrowers will receive an estimated $33.85 million of loan modifications or other relief as part of a $550 million joint state-federal settlement with mortgage lender and servicer SunTrust Mortgage Inc.
The settlement will provide direct payments to Virginia borrowers for past foreclosure abuses, loan modifications and other relief for borrowers in need of assistance, tough new mortgage servicing standards, and gives an independent monitor oversight authority to enforce the settlement. Because of SunTrust’s geographic footprint in the southeast, Virginia is one of the largest recipients of projected relief under the settlement, though exact amounts are still to be determined.
“As Attorney General, I will vigorously defend the rights of Virginia consumers, especially when it comes to something as vital as homeownership,” said attorney general Herring. “I am pleased we were able to reach an agreement which ends and provides compensation for several unacceptable past practices by SunTrust. Because of this settlement’s tougher servicing standards, Virginia borrowers will be treated more fairly and in compliance with the law.”
SunTrust Agreement Closely Mirrors National Mortgage Settlement
Virginia, along with 48 other states, the District of Columbia, the U.S. Department of Justice (DOJ) and the U.S. Department of Housing and Urban Development (HUD), and the U.S. Consumer Financial Protection Bureau (CFPB) have reached this settlement to address allegations of mortgage origination, servicing, and foreclosure abuses.
The agreement’s mortgage servicing terms largely emulate the 2012 National Mortgage Settlement (NMS) reached in February 2012 between the federal government, 49 state attorneys general, including Virginia, and the five largest national mortgage servicers. That agreement has provided consumers nationwide with more than $50 billion in direct relief, created tough new servicing standards, and implemented independent oversight.
Loan Modifications
The agreement requires SunTrust to provide Virginia borrowers with loan modifications or other relief expected to be worth an estimated $31.25 million. The modifications, which SunTrust chooses through an extensive list of options, include principal reductions and refinancing for underwater mortgages. SunTrust decides how many loans and which loans to modify, but must meet certain minimum targets.
Consumers who have questions or believe they may be eligible for relief or compensation as part of the settlement should contact SunTrust directly at 1-800-634-7928 or by using the email contact form at www.SunTrustMortgage.com.
Payments to Borrowers
Approximately 3,200 eligible Virginia 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 will be eligible for a payment from the national $40 million fund for payments to borrowers. The borrower payment amount will depend on how many borrowers file claims. Based on the number of eligible Virginia borrowers compared to the national total, Virginians are projected to receive $2.59 million in payments through the claim form process.
Eligible borrowers will be contacted about how to qualify for payments.
New Mortgage Servicing Standards
The settlement requires SunTrust to substantially change how it services mortgage loans, handles foreclosures, and ensures the accuracy of information provided in federal bankruptcy court.
The terms are designed to prevent past foreclosure abuses, such as robo-signing, improper documentation and lost paperwork.
The settlement creates dozens of new consumer protections and standards, including:
Making foreclosure a last resort by first requiring SunTrust to evaluate homeowners for other loss mitigation options;
Restricting foreclosure while the homeowner is considered for a loan modification;
New procedures and timelines for reviewing loan modification applications;
Giving homeowners the right to appeal denials; and
Requiring a single point of contact for borrowers seeking information about their loans and maintaining adequate staff to handle calls.
Independent Monitor
The National Mortgage Settlement’s independent monitor, Joseph A. Smith Jr., will oversee SunTrust’s compliance with the agreement. Smith served as the North Carolina Commissioner of Banks from 2002 until 2012, and is also the former Chairman of the Conference of State Bank Supervisors (CSBS). Smith will oversee implementation of the servicing standards required by the agreement; impose penalties of up to $1 million per violation (or up to $5 million for certain repeat violations); and issue regular public reports that identify any area in which the servicer falls short of the standards imposed in the settlement.
Additional Terms
The agreement resolves potential violations of civil law based on SunTrust’s deficient mortgage loan origination and servicing activities. The agreement does not prevent state or federal authorities from pursuing criminal enforcement actions related to this or other conduct by SunTrust, or from punishing wrongful securitization conduct that is the focus of the Residential Mortgage-Backed Securities Working Group. Additionally, the agreement does not prevent any action by individual borrowers who wish to bring their own lawsuits.
The agreement will be filed as a consent judgment in the U.S. District Court for the District of Columbia.
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