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SunTrust Heist: $968M Mortgage Fraud Scheme Exposed
The US government and 49 state attorneys general have reached a $968 million agreement with SunTrust Mortgage Inc. to address mortgage origination, servicing, and foreclosure abuses.
According to the agreement, SunTrust will pay $418 million to resolve its potential liability under the federal False Claims Act for originating and underwriting loans that violated its obligations as a participant in the Federal Housing Administration (FHA) insurance program.
SunTrust admitted that between January 2006 and March 2012, it originated and underwrote FHA-insured mortgages that did not meet FHA requirements, failed to carry out an effective quality control program, and failed to self-report defective loans to HUD. The company also admitted that numerous audits and documents described significant flaws in its origination, underwriting, and quality control processes.
“SunTrust’s irresponsible FHA lending practices caused grievous harm to homeowners and the housing market, as well as wasting hundreds of millions of dollars in taxpayer funds,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery.
As part of the settlement, SunTrust will provide $500 million in consumer relief for homeowners and abide by terms that will help to prevent the abuses of the past from being repeated. The agreement parallels the $25 billion National Mortgage Settlement and holds SunTrust accountable for years of abusive practices.
“This agreement, which totals nearly $1 billion, not only holds SunTrust accountable for years of abusive practices mortgage origination practices; it also provides for restoration,” said Associate Attorney General Tony West. “By the terms of this resolution, SunTrust is required to provide $500 million in consumer relief for homeowners as well as abide by terms that will help to prevent the abuses of the past from being repeated.”
Attorney General Eric Holder said, “SunTrust’s conduct is a prime example of the widespread underwriting failures that helped bring about the financial crisis. We will continue to hold accountable financial institutions that, in the pursuit of their own financial interests, misuse public funds and cause harm to hardworking Americans.”
Key Facts
- State: District of Columbia
- Category: Fraud & Financial Crimes
- Source: DOJ Press Release ↗
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