WASHINGTON (dpa-AFX) - SunTrust Banks, Inc. (STI) announced an agreement under which Freddie Mac agreed to release SunTrust from existing and future loan repurchase obligations for certain breaches of loan-level selling representations and warranties relating to specific populations of single-family loans and certain other obligations.
The company noted that under this agreement, Freddie Mac has released SunTrust from certain existing and future repurchase obligations for loans funded by Freddie Mac between 2000 and 2008, representing about 312,000 loans, which is a broader population of loans than considered in SunTrust's existing mortgage repurchase reserve.
SunTrust said the agreement also compensates Freddie Mac for certain outstanding and potential future losses relating to denials, rescissions and cancellations of mortgage insurance. The $65 million settlement agreement was adjusted for $25 million of credits related to certain prior repurchases, resulting in a one-time cash payment to Freddie Mac of $40 million.
SunTrust stated that while the majority of the settlement agreement is covered by its existing reserves for mortgage repurchases, the bank expects to incur an approximate $15 million incremental mortgage provision expense in the third quarter of 2013 related to this settlement agreement.
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