SunTrust Banks expects a possible settlement with the states over mortgage servicing and foreclosure issues could cost about $120 million, according to its annual report filed Friday with the Securities and Exchange Commission.
The five largest mortgage servicers settled earlier this month with attorneys general of 49 states, including Georgia, for $25 billion, including money for mortgage principal reductions and payments to help those who had suffered abuses in the foreclosure process. Oklahoma settled separately.
Atlanta-based SunTrust and several other servicers on the tier below the top five have begun discussions with state and federal authorities.
SunTrust has not reached a settlement yet with the attorneys general of the various states it operates in, but it said in January that it was in discussions. The bank said a charge related to a possible settlement could be made retroactive to the fourth quarter of 2011.
A $120 million pre-tax charge related to an expected settlement has been applied retroactively to the fourth quarter earnings statement. The charge will be $81 million after taxes.
SunTrust said in a statement that the charge includes costs of the settlement “as well as borrower-specific actions and/or legal matters to defend mortgage servicing claims if they are not settled.”
As a result, SunTrust’s net income available to common shareholders for the fourth quarter drops to $71 million from $152 million. Per-share earnings are now reported as 13 cents vs. 28 cents.
The agreement earlier this month with Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial was called the biggest settlement involving a single industry since a 1998 multistate tobacco deal. Georgia’s portion totals $814.7 million and includes funds for loan modifications, refinancing loans for underwater borrowers and payments to people who have already been foreclosed on.
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