|TRENTON – Acting Attorney General John J. Hoffman announced today that New Jersey has joined a $550 million multi-state-federal settlement with mortgage lender and servicer SunTrust Mortgage Inc. that resolves allegations the company engaged in abuses related to mortgage origination, servicing, and foreclosure.
The three-year settlement provides direct payments to eligible New Jersey borrowers for past foreclosure abuses. It also provides for loan modifications and other relief to borrowers in need of assistance, imposes tough new mortgage servicing standards on Sun Trust, and grants oversight authority to an independent monitor.
“This settlement holds a major mortgage servicer accountable for its unacceptable past business practices, and provides direct relief to New Jersey borrowers,” said Acting Attorney General Hoffman. “In addition, SunTrust must treat its borrowers more fairly going forward, because of the settlement’s tough new servicing standards.”
In addition to New Jersey, the Sun Trust settlement involves 48 states, the District of Columbia, the U.S. Department of Justice and the U.S. Department of Housing and Urban Development. The agreement’s mortgage servicing terms largely emulate the 2012 National Mortgage Settlement reached in February 2012 between the federal government, 49 state Attorneys General (including New Jersey), and the nation’s five largest national mortgage servicers.
The National Mortgage Settlement has provided consumers nationwide with more than $55 billion in direct relief, created tough new servicing standards, and implemented independent oversight.
SunTrust is based in Richmond, Virginia. It is a wholly-owned subsidiary of SunTrust Banks Inc., a bank and financial services company headquartered in Atlanta, Georgia. The settlement announced today requires SunTrust to provide New Jersey borrowers loan modifications or other consumer relief which, at this time, is estimated to total approximately $6.5 million. The loan modifications, which SunTrust will choose through an extensive list of options, include principal reductions and refinancing for underwater mortgages. SunTrust will decide how many loans and which loans to modify, but must meet certain minimum targets. More information about the loan modification process will be released at a later date, though current borrowers with loans serviced by SunTrust can contact the company directly with questions.
Approximately 88 eligible New Jersey borrowers whose loans were serviced by SunTrust and who lost their homes to foreclosure from January 1, 2008 through December 31, 2013 and encountered servicing abuses 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 eligible borrowers file claims.
Eligible borrowers will be contacted about how to qualify for payments.
In addition to loan modification relief and direct payment to certain eligible borrowers, 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 will prevent such past foreclosure abuses as robo-signing, improper documentation and lost paperwork.
The settlement includes 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 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.
The National Mortgage Settlement’s independent monitor, Joseph A. Smith Jr., will oversee SunTrust compliance with the settlement terms. Smith served as the North Carolina Commissioner of Banks from 2002 until 2012, and is also the former Chairman of the Conference of State Banks Supervisors (CSBS).
Smith will oversee implementation of new 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 quarter in which Sun Trust fell short of the standards imposed in the settlement.
The Sun Trust 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. Additionally, the settlement 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.
Deputy Attorney General Lorraine K. Rak, Chief of the Consumer Fraud Prosecution Section with the Division of Law, is representing the State in the Sun Trust matter.