SunTrust Under Federal Investigation for FHA Loan Practices
Atlanta banking giant SunTrust is under fire from the federal government, which is investigating the way it sealed deals on government-backed mortgages prior to the housing crisis.
SunTrust was not one of the five major banks that signed off on a $20 billion settlement earlier this year with attorneys general from 49 states. However, as one bank analyst put it to a reporter with The Atlanta Journal-Constitution, the mortgage crisis is akin to a long hangover after an industry-wide, free-for-all party. It’s resulted in a brutal headache for our entire economy, but SunTrust, which had been dancing on tables along with the rest of the banks, still hasn’t been held accountable for its reckless lending practices in handling Federal Housing Administration loans.
Miami foreclosure defense attorneys understand that those currently in danger of losing their homes could benefit if the investigating agency, the U.S. Department of Housing and Urban Development, acts swiftly.
The investigation was actually launched back in April, though it has just now been made public. SunTrust, which has an estimated $180 billion in assets and 1,600 branches in seven states, including Florida, has said it is cooperating with federal officials, but of course declined to comment.
The announcement of the investigation comes on the heels of a $21 million payout over Department of Justice accusations of racial discrimination against black and Hispanic borrowers between 2005 and 2009. The DOJ spearheaded a two-year investigation on the matter, combing through an estimated 850,000 residential mortgages before finding that the company had charged higher fees and interest rates to minority borrowers. This was not based on risk assessment, but rather on race and national origin. The proceeds of the settlement are expected to go to compensate discrimination victims who were unfairly overcharged.
SunTrust denied that this had been its practice, but reportedly believed going to court to fight it would cost too much.
(Similarly, Bank of America and Wells Fargo have also had to pay up for the exact same thing – $335 million and $175 million, respectively.)
Now, the investigation over FHA lending practices is likely to cost it more than the $2 billion it’s already paid to Fannie Mae, which demanded the bank buy back mortgages that didn’t meet its standards.
And that’s essentially what HUD is looking into. The FHA provides insurance to home lenders on loans with down payments that can be as little as 3.5 percent. However, those loans have to meet very specific guidelines. However, it appears that SunTrust, like so many other financial institutions, tossed those rules aside and simply granted a mortgage to anyone who applied – meaning a huge number of loans were doomed from the start.
In similar accusations made last year by the U.S. Attorney’s Office in New York against Deutsche bank, the government alleged that the company had ignored every single red flag and disregarded due diligence prior to endorsing mortgages that were approved for federal insurance.
Deutsche bank agreed in May to settle with the federal government for $202 million, although it was estimated that the defaults that were attributed to the lender ultimately cost taxpayers nearly $370 million.
If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Legal for a confidential appointment to discuss your rights. Call 305-358-7991.