“SunTrust so bungled its administration of the program that many homeowners would have been exponentially better off having never applied through the bank in the first place.”
So said the Special Inspector General for TARP (SIGTARP), Christy Romero, regarding SunTrust Mortgage Inc.’s handling of dollars received through the Troubled Asset Relief Program (TARP) to go toward helping struggling homeowners.
Earlier this month, SIGTARP announced—along with the Department of Justice, the Federal Housing Finance Agency’s IG, the U.S. Attorney’s Office for the Western District of Virginia, and the U.S. Postal Inspection Service—a prosecution agreement resolving a criminal investigation into SunTrust’s administration of the Home Affordable Modification Program (HAMP). HAMP was created in 2008 as part of the Troubled Asset Relief Program (TARP), in order to help eligible homeowners with loan modifications on their home mortgage debt.
In documents that were filed along with this case, it was revealed that SunTrust, which received $4.85 billion in federal taxpayer funds through TARP, both misled mortgage servicing customers who sought mortgage relief through HAMP and failed to process HAMP applications. The company was so negligent that they put piles of unopened homeowners’ applications in a room, the floor of which actually buckled under the weight of unopened document packages. Their practices meant that many homeowners were improperly foreclosed upon, as documents and paperwork were lost and applications were completely ignored.
The company has agreed to pay $320 million to resolve the criminal investigation into its HAMP program. Despite the egregious nature of what they did, it is worth noting that this is less than one half of one percent of its servicing portfolio (as of December 2013).Of the money SunTrust has agreed to pay:
- $179 million will go toward restitution for borrowers to compensate for damage done by the company’s mismanagement. If more than $179 million is found to be needed, the bank has agreed to guarantee an additional $95 million for restitution on top of that.
- $16 million will go toward forfeiture, to be available for law enforcement agencies working on waste, fraud, and abuse matters related to TARP.
- $20 million will go to establish a fund that will be distributed to organizations that provide counseling and other services to distressed homeowners.
SunTrust is also required to implement corrective measures to prevent problems like the ones that led to this investigation, including increasing their loss mitigation staff, monitoring their mortgage modification process, and providing semi-annual reports on their compliance with this agreement.
– – Rebecca Thiess