Posted on Thursday, March 17, 2011
An internal review by SunTrust Banks, Inc. has uncovered problems with the paperwork in thousands of foreclosure cases, according to the Atlanta-based company’s annual regulatory filing with the Securities and Exchange Commission.
“We recently conducted an assessment of our foreclosure process in all states,” SunTrust explained in the report. “Our review indicated approximately 4,000 files…contained documents with technical issues in the foreclosure complaint verification, affidavit preparation, and notary processes.”
SunTrust says the number of files with problems represents just under 15 percent of the company’s active foreclosure proceedings and according to the company’s statement, no deficiency identified violated the law.
SunTrust says it plans to replace any documentation that was not prepared properly in pending foreclosure actions that have not yet been decided. The company says this process of resubmitting affidavits “will be substantially completed during the first quarter of 2011.”
Similar scenarios have played out among all the major mortgage servicers. Federal regulators have indicated
that even though very few, if any, homes were wrongfully foreclosed upon because of breakdowns in foreclosure processes, at least 14 servicers will face fines and be required to implement remedial actions and processing controls to atone for their part in the robo-signing scandal that swept the nation last fall.
In addition to the up-front costs associated with fines the company may be hit with, SunTrust says its ability to mitigate losses on defaulted loans will be impacted by delays in foreclosure proceedings due to case reviews and refiling of affidavits as a result of “our practices or failures to adhere to our policies,” the company said.
“Any delay in the foreclosure process will adversely affect us by increasing our expenses related to carrying such assets, such as taxes, insurance, and other carrying costs, and exposes us to losses as a result of potential additional declines in the value of such collateral,” SunTrust explained.
“While we cannot predict the ultimate impact of any delay in foreclosure sales, or any issues that may arise as a result of alleged irregularities with respect to previously completed foreclosure activities, we may be subject to additional borrower and non-borrower litigation and governmental and regulatory scrutiny related to our past and current foreclosure activities,” SunTrust said in the regulatory filing. “This scrutiny may extend beyond our pending foreclosure matters to issues arising out of alleged irregularities with respect to previously completed foreclosure activities.”
The company added, “We expect that our costs will increase modestly in 2011 as a result of the additional resources necessary to perform the foreclosure process assessment, revise affidavit filings, and make any other operational changes. In addition, process changes required as a result of our assessment could increase our default servicing costs over the longer term.”
By: Carrie Bay, DS NEWS