SunTrust Banks, Atlanta’s largest bank is under investigation by a federal agency over its practices in making mortgages that were guaranteed by the government.
The U.S. Department of Housing and Urban Development notified SunTrust Banks April 25 of an investigation “relating generally to origination practices” for Federal Housing Administration loans, the bank said in a regulatory filing Wednesday.
SunTrust said it “is cooperating with the investigation.” A bank spokesman declined further comment.
The FHA issues insurance to lenders on loans with down payments as little as 3.5 percent, if they meet specific guidelines.
The HUD investigation disclosure follows SunTrust Mortgage’s recent $21 million settlement with the Justice Department over allegations of racial discrimination in lending practices. SunTrust denied the allegations, but settled to avoid costly litigation.
A HUD spokesman declined to comment. The Wall Street Journal has reported that SunTrust was one of three mortgage lenders that received subpoenas sometime before June from HUD.
Several major banks this year have settled claims of reckless lending practices with FHA loans.
The housing boom continues to dog SunTrust. Investors such as Fannie Mae have demanded SunTrust buy back mortgages that didn’t meet the their standards, costing the bank nearly $2 billion to date.
“It’s like a hangover that stays with you from the party,” said Chris Marinac, a bank analyst with FIG Partners in Atlanta. “There was a mortgage party in the industry and [SunTrust was] there dancing.”