Fed releases SunTrust order over $160M mortgage penalty
Settlements continue to dent lender's profits
The Federal Reserve officially released the order related to SunTrust's (STI) $160 million penalty announced in October 2013, regarding the lender’s unsafe and unsound processes and practices in residential mortgage loans servicing and foreclosure processing.
The process was waiting to be completed after the U.S. Department of Housing and Urban Development, the U.S. Department of Justice, the Consumer Financial Protection Bureau and attorneys general in 49 states and the District of Columbia announcement in June over a $968 million mortgage origination settlement with SunTrust to cover mortgage servicing and foreclosure abuses.
Under the $160 million penalty, SunTrust was charged for failing to provide effective oversight with respect to loan servicing, loss mitigation, foreclosure activities and related functions of SunTrust Mortgage.
This penalty is similar to its agreement with the Department of Justice also announced in October over lingering mortgage issues.
As a result, the bank’s third-quarter 2013 earnings took a huge hit, reporting a net profit of $179 million, or $0.33 a share, for the third quarter. If the firm had not been forced to settle legacy mortgage issues, SunTrust shareholders would have benefited from a much higher profit of $0.66 a share.
The bank is still feeling the pressure of recent settlements.
At the beginning of July, SunTrust Mortgage agreed to pay $320 million to resolve the criminal investigation into the company’s Home Affordable Modification Program by the U.S. Department of Justice.
According to the DOJ, SunTrust misled numerous mortgage-servicing customers who sought mortgage relief through HAMP.
And once again, it dented the lender’s earnings.
SunTrust reported a second-quarter 2014 net income of $387 million, or $0.72 per share, compared to $0.73 in the prior quarter and $0.68 in the second quarter of 2013.