During United States recession from 2007 to 2009, many mortgage companies and mortgagors were affected badly. Mortgage business is said to be a major point that induced the recession. Housing bubble system that holds United States burst out during that period. House value in the market was dropped drastically. Right before recession occurred, people began ceasing their investments on residential properties and worsening the situation. SunTrust Mortgage crisis occurred during the difficult period and still carried on even after recession had ended.
What Happened during SunTrust Mortgage Crisis?
Similar with crisis in other mortgage companies, SunTrust Mortgage crisis happened due to the increase of mortgage-backed securities proposed by banks and hedge funds. This caused many people to demand for mortgage loans and created house bubble. However, when Federal Reserved inflated interest rates, homeowners who were taking adjustable rate mortgage loans were unable to meet monthly payment that suddenly catapulted. Housing price then dropped majorly. Homeowners were neither able to make payment nor selling their houses. It made them defaulting from mortgage loans and facing foreclosures.
SunTrust Mortgage crisis occurred when the mortgage company proposed loan modification to deal with such situation. The program is called Home Affordable Modification Program or HAMP. HAMP at that time aimed to help homeowners who struggled financially due to crisis by helping them in altering their loan programs so they could avert foreclosures. The program was actually done not only by this mortgage companies, but also many others.
The main cause of SunTrust Mortgage crisis was because HAMP that the company proposed was badly mismanaged. When presenting HAMP to its customers, there were some misleading materials and omitted information. The mortgage company also failed to serve applicants of this loan modification program in timely manner. As a result, thousands of HAMP applicants faced severe financial troubles. Foreclosures number increased during that period. Applicants also suffered from decreasing credit score for defaulting from their loans.
Many customers sued the mortgage company, leading up to SunTrust Mortgage crisis. This mortgage company was being investigated and the matter was brought into court. The company was found guilty and agreed to pay $320 million in settlement. As much as $179 million was distributed to homeowners who were severely harmed by the situation. In addition to that, SunTrust was asked to increase the number of its loss mitigation staff. Court also required it to give semi-annual reports about its consent to the settlement.
The company slowly regains its footing back after SunTrust Mortgage crisis. It spends more on improving many sides of its business, especially in customer service. Homeowners are returning to the company as market’s confidence on this mortgage company keeps increasing by day. It also extends its community reach by spending more on charity programs. As a result, by the end of 2013, the company’s assets increased up to $175 billion.
Economic recession really affected every mortgage stakeholders badly. However, homeowners were the ones who got biggest punch. SunTrust Mortgage crisis helped us learning that putting mortgage customer’s interests as the top priority is very important.