TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/343616
46 | Th e M Rep o RT O r i g i nat i O n S e r v i c i n g a na ly t i c S S e c O n da r y m a r k e t SERVICING Department LocaL eDition Suntrust reaches Settlement with Justice department, HUd, cFPB Can $968 billion overCome damage from the Company's mortgage misConduCt? georgia //SunTrust Banks announced Tuesday it has struck a nearly $1 billion deal with the government to settle allegations of misconduct in both its lend- ing and servicing practices. In an agreement reached with the Consumer Financial Protection Bureau (CFPB), Justice Department, HUD, and attorneys general in 49 states and the District of Columbia, SunTrust agreed to provide relief to consumers and payments to the government totaling a com- bined value of $968 million. Among other complaints, the government had charged SunTrust with "systemic mort- gage servicing misconduct," in- cluding failing to promptly and accurately apply borrower pay- ments, robo-signing, and other illegal foreclosure practices. The government order re- quires the company to provide $500 million in relief to under- water borrowers. SunTrust is also required to pay $40 million to approximately 48,000 con- sumers who lost their homes, as well as $10 million to cover losses suffered by the Federal Housing Administration (FHA) and other government insurers. In a statement, SunTrust Banks chairman and CEO William H. Rogers Jr. said, "As we said when these agreements in principle were announced, we are pleased to have resolved these legacy mortgage mat- ters. Like most major financial institutions, we are addressing issues related to mortgage mat- ters stemming from the financial crisis and recession period." The bank said it will not incur an incremental charge as a result of the settlement. In addition, SunTrust will pay $418 million to resolve its potential liability for originat- ing and underwriting FHA loans between January 2006 and March 2012 that did not meet agency requirements. According to a release from the Justice Department, the bank admitted that numerous audits between 2009 and 2012 "described signifi- cant flaws and inadequacies in SunTrust's origination, under- writing, and quality control processes," with as many as 50 percent or more of FHA-insured mortgages in non-compliance. "SunTrust's conduct is a prime example of the wide- spread underwriting failures that helped bring about the financial crisis," said Attorney General Eric Holder. "From mortgage origination to servicing to se- curitization, the Department of Justice is attacking every facet of conduct that led to the Great Recession." The servicing portion of the settlement mirrors the 2012, $25 billion National Mortgage Settlement between top servicers and the government, which the Justice Department says was used as a framework for the lat- est deal. While the agreement closes the book on potential violations in SunTrust's origination and servicing operations, it does not prevent agencies from pursuing the bank on criminal actions or wrongful securitization conduct. It also leaves the door open for CFPB to take civil enforcement actions on any future violations of its mortgage servicing rules implemented at the start of the year. green tree Put on rating Watch negative Following OSmO report the serviCer is growing too quiCkly to maintain ComplianCe. Minnesota //Fitch Ratings announced in a release that it is changing Green Tree's servicer grades to "Rating Watch Negative," citing "ongoing concerns with Green Tree's rapid growth and portfolio integration," as well as the results of the latest compliance update from the Office of the Mortgage Settlement Oversight (OSMO), which showed the servicer failed to meet some of the minimum requirements agreed on by some of the nation's biggest outfits. Green Tree joined those ranks last year when parent company, Walter Investment Management Corp., acquired servicing rights on part of a portfolio formerly held by Residential Capital. In a statement at the time, Mark J. O'Brien, CEO of Walter Investment, said the firm "is committed to maintaining a highly compliant environment that focuses on high standards of customer service," adding that the servicer will work to address and correct any problem areas in a timely manner. However, Fitch still has its doubts, saying the OSMO report "indicates some procedures and controls challenges in [Green Tree's] servicing of the recently acquired Residential Capital LLC (ResCap) loans." Fitch's update follows an April announcement in which the agency assigned Green Tree a "Negative Outlook" based partly on the company's growth and on higher servicing expectations from regulators. At the same time, Fitch SERVICING