SunTrust to pay $320 million over HAMP missteps

The Justice Department alleged that the bank misled mortgage servicing customers who sought relief through the program

SunTrust Mortgage has agreed to a $320 million settlement with the Justice Department that resolves a criminal investigation of the lender’s administration of the Home Affordable Modification Program.

The DOJ alleged that SunTrust misled mortgage servicing customers looking for mortgage modifications through HAMP. “Specifically, SunTrust made material misrepresentations and ommissions to borrowers in HAMP solicitations, and failed to process HAMP applications in a timely fashion,” the DOJ said in a release. “As a result of SunTrust’s mismanagement of HAMP, thousands of homeowners who applied for a HAMP modification with SunTrust suffered serious financial harms.”

“Instead of helping distressed homeowners, SunTrust’s mismanagement drove up foreclosures, decimated individual credit and increased costs for hardworking men and women across our nation,” said Attorney General Eric Holder.  “This resolution will provide much-needed restitution for victims. It will make available substantial funds to help other homeowners avoid foreclosure. And it will result in the kinds of systemic changes needed to ensure that this will not happen again.  This outcome demonstrates yet again that the Justice Department will never waver in its ongoing pursuit of those whose reckless and willful actions harm the American people and undermine our financial markets.”

As part of the settlement, SunTrust will pay $179 million in restitution to compensate borrowers. The money will be distributed to borrowers in eight pre-determined categories. If more is needed, the bank will also guarantee an additional $95 million. SunTrust will also pay $10 million directly to Fannie Mae and Freddie Mac.

Additionally, the lender will pay $16 million in forfeiture and $20 million to establish a fund for organizations that provide counseling to distressed homeowners.