SunTrust Banks Inc. said Thursday that it had agreed to settle claims by the U.S. Justice Department and the U.S. Department of Housing and Urban Development over SunTrust's handling of government-backed mortgages.
As per the settlement, the bank will provide $500 million in consumer relief and pay $468 million in cash to the government agencies over claims covered by Federal Housing Administration-insured mortgages that the bank originated between 2006 and early 2012, as well as claims under the National Mortgage Settlement.
SunTrust has also agreed to a $373 million settlement with Fannie Mae and a $65 million settlement with Freddie Mac over loans funded by the government-sponsored enterprises between 2000 and 2012. Credits for earlier buybacks will reduce SunTrust's cash payments to about $228 million to Fannie Mae and $40 million to Freddie Mac.
The company says its third quarter results will be impacted by settlements. In aggregate, the payments will have a negative after-tax impact of $179 million, or $0.33 per share, on the company's third quarter earnings results.
‘SunTrust is pleased to have resolved a number of legacy mortgage matters,’ says William H. Rogers, Jr., chairman and CEO of SunTrust Banks Inc., in a statement. ‘These settlements reduce uncertainty, further improve our risk profile and enhance our ability to focus on future growth.’
‘Fannie Mae's agreement with SunTrust is another sign of progress in addressing outstanding issues so that the housing market can continue to strengthen,’ says Bradley Lerman, executive vice president and general counsel for Fannie Mae. ‘This agreement resolves repurchase issues and compensates taxpayers fairly, allowing Fannie Mae and SunTrust to move forward with an even stronger relationship.
‘As we've previously disclosed, we expect to complete reviews on legacy loans for potential repurchase by the end of 2013,’ Lerman adds. ‘Our agreement with SunTrust complements our previous agreements with Bank of America, Citi and other business partners to resolve repurchase requests and other matters.’
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