The federal government is investigating SunTrust Banks Inc.’s mortgage unit over its handling of federally funded loan modifications.
SunTrust Mortgage Inc. was advised about the investigation by the U.S. Attorney’s Office for the Western District of Virginia.
Also participating in the investigation is the Office of the Special Inspector General for the Troubled Asset Relief Program.
The TARPÂ OIG polices the Home Affordable Modification Program, which is funded by TARP.
Atlanta-based SunTrust disclosed the investigation in a filing with the Securities and Exchange Commission.
The investigation centers on SunTrust’s administration of HAMP.
“The western district’s investigation focuses on whether, during 2009 and 2010, STM harmed borrowers and violated civil or criminal laws by making misrepresentations and failing to properly process applications for modifications of certain mortgages owned by the GSEs pursuant to the HAMP guidelines,” the filing states. “While no determinations have been made, the western district has indicated that they intend to pursue some form of action and may impose substantial penalties on STM.”
The government is trying to determine whether SunTrust didn’t provide enough resources to its loss mitigation function. It also wants to determine if SunTrust made misrepresentations to borrowers about timelines or other areas of the HAMP modification process.
SunTrust said it is cooperating in the investigation and said it believes it has substantial defenses to the asserted allegations.
In the same filing, SunTrust disclosed that it has committed to providing $500 million in relief as part of the national mortgage servicing settlement agreement, though it has yet to finalize an agreement.
SunTrust additionally disclosed a lawsuit filed in U.S. District Court for the Southern District of New York by bankrupt Residential Funding Company LLC. The complaint alleges breaches of representations and warranties made in connection with loan sales. The GMACÂ Mortgage LLC affiliate seeks indemnification against losses allegedly suffered by RFC.
