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MarketScreener Homepage  >  Equities  >  Nyse  >  SunTrust Banks    STI   

SUNTRUST BANKS

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SunTrust to Pay More Than $1 Billion in Mortgage Settlements --Update

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10/10/2013 | 06:30pm EDT
   By Andrew R. Johnson and Alan Zibel 
 

SunTrust Banks Inc. (>> SunTrust Banks, Inc.) is paying more than $1 billion to settle federal allegations of mortgage violations, in the latest move by a bank to put behind it costly legal issues stemming from the financial crisis.

The Atlanta-based bank said Thursday it will pay $468 million in cash and provide $500 million in relief to borrowers under agreements with the Justice Department, Department of Housing and Urban Development and Federal Reserve. It is also paying more than $200 million to resolve claims with Fannie Mae (>> Federal National Mortgage Association) and Freddie Mac (>> Federal Home Loan Mortgage Corp).

A portion of the money--$160 million--will be paid to resolve claims that SunTrust mishandled borrowers' loans. As part of that deal, SunTrust is joining five other mortgage servicers who reached a landmark $25 billion settlement with 49 states and federal regulators last year addressing allegations of "robo-signing" foreclosure documents.

"SunTrust is pleased to have resolved a number of legacy mortgage matters," William Rogers Jr., chairman and chief executive of SunTrust, said in a statement Thursday. "These settlements reduce uncertainty, further improve our risk profile, and enhance our ability to focus on future growth."

SunTrust said it plans to make the $160 million payment tied to the national mortgage settlement partly in the form of consumer relief.

A HUD spokeswoman declined to comment, and Justice Department representatives couldn't immediately be reached Thursday.

SunTrust is the first bank to join the national mortgage settlement since the deal was announced in February 2012 with Bank of America Corp. (>> Bank of America Corp), Citigroup Inc. (C), J.P. Morgan Chase & Co. (>> JPMorgan Chase & Co) and Ally Financial Inc.

The settlement introduced more than 300 new servicing standards that required the banks to improve their communication with borrowers who are seeking loan modifications.

At the time, officials suggested that other banks soon would sign on to the settlement, but SunTrust is the first to do so. In addition to joining the national mortgage settlement, SunTrust also is paying to resolve civil and administrative claims tied to loans insured by the Federal Housing Administration that the bank made between Jan. 1, 2006, and March 31, 2012.

SunTrust, which is scheduled to report third-quarter results on Oct. 18, said Thursday that the settlements are will negatively hurt after-tax earnings by $179 million, or 33 cents per share.

The company said it incurred $323 million in operating losses in the quarter due to the government settlements.

SunTrust's shares were down 0.5% at $33.20 in after-hours trading Thursday.

The bank said it also reached deals with government-sponsored mortgage firms Freddie Mac and Fannie Mae over allegations that it sold shoddy loans to the companies. SunTrust last week announced a $65 million settlement with Freddie Mac. On Thursday, the bank said it also reached a $373 million settlement with Fannie Mae.

SunTrust's settlement with Freddie Mac was adjusted with $25 million in credits related to prior loan repurchases. The bank's payment to Fannie Mae will be reduced by $145 million in credits.

Stocks mentioned in the article
ChangeLast1st jan.
BANK OF AMERICA CORPORATION -0.29% 23.855 Delayed Quote.-32.03%
SUNTRUST BANKS 1.26% 70.13 Delayed Quote.0.00%
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Financials (USD)
Sales 2018 9 005 M - -
Net income 2018 2 775 M - -
Net Debt 2018 13 169 M - -
P/E ratio 2018 8,79x
Yield 2018 3,57%
Capitalization 30 754 M 30 754 M -
EV / Sales 2017 4,16x
EV / Sales 2018 3,98x
Nbr of Employees 22 899
Free-Float -
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