SunTrust 2015 Annual Report Download - page 178

Notes to Consolidated Financial Statements, continued
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regarding certain mortgage servicing claims, discussed below at
“United States Mortgage Servicing Settlement.” SunTrust
continues its engagement with the FRB to demonstrate
compliance with its commitments under the Consent Order.
United States Mortgage Servicing Settlement
In the second quarter of 2014, STM and the U.S., through the
DOJ, HUD, and Attorneys General for several states, reached a
final settlement agreement related to the National Mortgage
Servicing Settlement. The settlement agreement became
effective on September 30, 2014 when the court entered the
Consent Judgment. Pursuant to the settlements, STM made $50
million in cash payments and committed to provide $500 million
of consumer relief by the fourth quarter of 2017 and to implement
certain mortgage servicing standards. While subject to
confirmation by the independent Office of Mortgage Settlement
Oversight (“OMSO”) appointed to review and certify
compliance with the provisions of the settlement, the Company
believes it has fulfilled its consumer relief commitments. STM
also implemented all of the prescribed servicing standards within
the required timeframes. Compliance with the servicing
standards continues to be monitored, tested, and reported
quarterly by an internal review group and semi-annually by the
OMSO. As a result, the Company does not expect to incur
additional costs in satisfying its consumer relief obligations or
implementation of the servicing standards associated with the
settlement.
DOJ Investigation of GSE Loan Origination Practices
In January 2014, STM received notice from the DOJ of an
investigation regarding the origination and underwriting of
single family residential mortgage loans sold by STM to Fannie
Mae and Freddie Mac. The DOJ and STM have not yet engaged
in any material dialogue about how this matter may proceed and
no allegations have been raised against STM. STM continues to
cooperate with the investigation.
Mortgage Modification Investigation
In the third quarter of 2014, STM resolved claims by the United
States Attorney’s Office for the Western District of Virginia and
the Office of the Special Inspector General for the Troubled Asset
Relief Program relating to STM's administration of HAMP.
Pursuant to the settlement, the Company paid $46 million,
including $20 million to fund housing counseling for
homeowners, $10 million in restitution to Fannie Mae and
Freddie Mac, and $16 million to the U.S. Treasury, and
transferred its minimum consumer remediation obligation of
$179 million (which may increase to a maximum of $274
million) to the required deposit account to be controlled by a
third party claims administrator. The Company incurred a $204
million pre-tax charge in the second quarter of 2014 in
connection with this matter, which included its estimate of the
consumer remediation obligation. STM continues to cooperate
with the government and the claims administrator regarding
administration of the consumer remediation payment process,
which currently is expected to resolve in early 2016. The
Company does not currently anticipate it will exceed the $179
million minimum consumer remediation obligation.
Residential Funding Company, LLC v. SunTrust Mortgage,
Inc.
STM has been named as a defendant in a complaint filed
December 17, 2013 in the Southern District of New York by
Residential Funding Company, LLC ("RFC"), a Chapter 11
debtor-affiliate of GMAC Mortgage, LLC, alleging breaches of
representations and warranties made in connection with loan
sales and seeking indemnification against losses allegedly
suffered by RFC as a result of such alleged breaches. The case
was transferred to the United States Bankruptcy Court for the
Southern District of New York. The litigation remains active in
the Bankruptcy Court and discovery has commenced.
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 with Twin Rivers certain loans
referred to them by SunTrust 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.
SunTrust has filed a motion to dismiss the Thurmond case which
was granted in part and denied in part, allowing limited discovery
surrounding the argument that the statute of limitations for
certain claims should be equitably tolled. Thurmond has been
stayed pending a ruling in a similar case currently before the
Third Circuit. The Acosta plaintiffs have voluntarily dismissed
their case.
United States Attorney’s Office for the Southern District of
New York Foreclosure Expense Investigation
STM has been cooperating with the United States Attorney's
Office for the Southern District of New York (the "Southern
District") in a broad-based industry investigation regarding
claims for foreclosure-related expenses charged by law firms in
connection with the foreclosure of loans guaranteed or insured
by Fannie Mae, Freddie Mac, or FHA. The investigation relates
to a private litigant qui tam lawsuit filed under seal and remains
in early stages. The Southern District has not yet advised STM
how it will proceed in this matter. The Southern District and STM
engaged in dialogue regarding potential resolution of this matter
as part of the National Mortgage Servicing Settlement, but were
unable to reach agreement.