An investigation has been launched into SunTrust Banks Inc.’s origination practices on loans insured by the Federal Housing Administration. Word of the investigation comes on the heels of a lending discrimination settlement and seems to shed light on a recent executive recruiting decision.
The Atlanta-based company disclosed that an investigation has been commenced by the Department of Housing and Urban Development.
SunTrust received notice of HUD’s investigation on April 25.
At issue are the mortgage lender’s origination practices for FHA-insured loans, according to the Form 10-Q filing with the Securities and Exchange Commission.
“The company is cooperating with the investigation,” the filing stated.
Given the disclosure of the investigation, the May 30 announcement from SunTrust that it would bring on former Federal Housing Commissioner David H. Stevens as president of SunTrust Mortgage makes more sense.
Stevens subsequently backed out of the deal to stay on as the president and chief executive officer of the Mortgage Bankers Association.
SunTrust Mortgage Inc. recently agreed to pay $21 million to the Department of Justice to settle charges of discrimination on loans originated between 2005 and 2009.
The Justice Department’s complaint alleged violations of the Fair Housing Act and Equal Credit Opportunity Act by charging 20,000 black and Hispanic borrowers higher fees and interest rates than similarly situated white borrowers.
