The SunTrust settlement includes relief for distressed homeowners valued at $500 million

A nearly $1-billion settlement with Virginia, California and other state and federal authorities will close out two major investigations into possible mortgage wrongdoing by the home-lending arm of Atlanta's SunTrust Banks Inc. Virginia is set to receive $34 million in loan modifications or other relief.

The agreements announced Tuesday are the latest in a series involving banks accused of abuses in issuing home loans, handling troubled borrowers and packaging mortgages into securities for sale to investors.

The settlement with SunTrust Mortgage Inc., which focuses on loan origination and customer service issues, includes relief for distressed homeowners valued at $500 million and a cash payment of $468 million.

Virginia is projected to be one of the largest relief recipients under the settlement, though exact amounts are undetermined, Virginia Attorney General Mark R. Herring said in a news release. That's because of SunTrust's large presence in the Southeast.

SunTrust's conduct is a prime example of the widespread underwriting failures that helped bring about the financial crisis.— U.S. Atty. Gen. Eric H. Holder Jr.

As part of the settlement, Virginia borrowers can receive more than $31 million in loan modifications or other relief, including refinancing for underwater mortgages, Herring said.

SunTrust also has agreed to pay $50 million in cash to compensate for servicing abuses, $40 million of which will be distributed to borrowers and homeowners through the Borrower Payment Fund established by the national mortgage settlement and administered by the states.

About 3,200 Virginia borrowers who lost their homes to foreclosure from Jan. 1, 2008, to Dec. 31, 2013, and encountered servicing abuse will be eligible to receive payments from the national fund. Herring's office projects those borrowers could receive up to $2.6 million in those payments.

"As Attorney General, I will vigorously defend the rights of Virginia consumers, especially when it comes to something as vital as homeownership," Herring said in a statement. "I am pleased we were able to reach an agreement which ends and provides compensation for several unacceptable past practices by SunTrust. Because of this settlement's tougher servicing standards, Virginia borrowers will be treated more fairly and in compliance with the law."

The $500 million in nationwide borrower relief parallels the assistance that five major banks agreed to provide their troubled customers in the well-publicized $25-billion national mortgage settlement reached in 2012. Components include loan modifications, such as reductions in principal, and short sales, in which borrowers are freed from mortgage debt by selling their homes for less than what they owe.

Borrowers with loans serviced by SunTrust can contact the company directly with questions at (800) 634-7928.