SunTrust 2012 Annual Report Download - page 207

Notes to Consolidated Financial Statements (Continued)
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On March 12, 2012, the Court granted in part and denied in part the motion to dismiss. The Company filed a subsequent
motion to dismiss the remainder of the case on the ground that the Court lacked subject matter jurisdiction over the remaining
claims. On October 30, 2012, the Court dismissed all claims in this action. Immediately thereafter, plaintiffs' counsel initiated
a substantially similar lawsuit against the Company substituting two new plaintiffs. SunTrust intends to file a motion to dismiss
in this action.
SunTrust Mortgage Reinsurance Class Actions
STM and Twin Rivers Insurance Company ("Twin Rivers") have been named as defendants in two putative class actions
alleging that the companies entered into illegal “captive reinsurance” arrangements with private mortgage insurers. More
specifically, plaintiffs allege that SunTrust’s selection of private mortgage insurers who agree to reinsure loans referred to
them by SunTrust with Twin Rivers results in illegal “kickbacks” in the form of the insurance premiums paid to Twin Rivers.
Plaintiffs contend that this arrangement violates the Real Estate Settlement Procedures Act (“RESPA”) and results in unjust
enrichment to the detriment of borrowers. The first of these cases, Thurmond, Christopher, et al. v. SunTrust Banks, Inc. et
al., was filed in February 2011 in the U.S. District Court for the Eastern District of Pennsylvania. This case was stayed by the
Court pending the outcome of Edwards v. First American Financial Corporation, a captive reinsurance case that was pending
before the U.S. Supreme Court at the time. The second of these cases, Acosta, Lemuel & Maria Ventrella et al. v. SunTrust
Bank, SunTrust Mortgage, Inc., et al., was filed in the U.S. District Court for the Central District of California in December
2011. This case was stayed pending a decision in the Edwards case also. In June 2012, the U.S. Supreme Court withdrew its
grant of certiorari in Edwards and, as a result, the stays in these cases were lifted. The plaintiffs in Acosta voluntarily dismissed
this case. A motion to dismiss is pending in the Thurmond case.
United States and States Attorneys General Mortgage Servicing Claims
In January, 2012, the Company commenced discussions related to a mortgage servicing settlement with the U.S., through the
Department of Justice, and Attorneys General for several states regarding various potential claims relating to the Company's
mortgage servicing activities. While these discussions are continuing, the Company has not reached any agreement with such
parties. The Company has estimated the cost of resolving these and potential similar claims, including the costs of such a
settlement, borrower-specific actions, and/or legal matters to defend such claims if they are not settled, and accrued this
expense in its financial results.
False Claim Act Litigation
SunTrust Mortgage is a defendant in a qui tam lawsuit brought in the U.S. District Court for the Northern District of Georgia
under the federal False Claims Act, United States ex rel. Bibby & Donnelly v. Wells Fargo, et al. This lawsuit originally was
filed under seal, but the second amended complaint was unsealed by the District Court in October 2011. The plaintiffs, who
allege that they are officers of a mortgage broker, allege that numerous mortgage originators, including SunTrust Mortgage,
made false statements to the U.S. Department of Veterans Affairs in order to obtain loan guarantees by the VA under its Interest
Rate Reduction Refinancing Loans ("IRRRL") program. Plaintiffs allege that the mortgage originators charged fees in
connection with these loans that were not permitted under the IRRRL program and made false statements to the VA to the
effect that the loans complied with all applicable regulations or program requirements. According to Plaintiffs, by doing so,
the originators caused the VA to pay, among other costs, amounts to honor the loan guarantees to which they were not entitled.
Plaintiffs have sued on their own behalf and on behalf of the U.S., and seek, among other things, unspecified damages equal
to the loss that SunTrust Mortgage allegedly caused the U.S. (trebled under the False Claims Act), statutory civil penalties of
between $5,500 and $11,000 per violation, injunctive relief, and attorneys' fees. To date, the U.S. has not joined in the
prosecution of this action. SunTrust Mortgage and other defendants have filed motions to dismiss. SunTrust Mortgage and
the relators have reached an agreement to settle this dispute that is awaiting bankruptcy court approval.
HUD Investigation
On April 25, 2012, the Company was informed of the commencement of an investigation by the HUD relating generally to
origination practices for FHA loans. The Company continues to cooperate with the investigation.