Monday, May 2, 2022

Sterling in Mich. in settlement talks with OCC, DoJ

Sterling Bancorp in Southfield, Mich., has started having discussions with federal agencies to resolve longstanding issues tied to its Advantage Loan Program. 

The $2.8 billion-asset company said in a press release Monday that talks with the Department of Justice and the Office of the Comptroller of the Currency are under way. Investigations by both agencies “have progressed significantly,” Sterling said. 

“It is too early in the process for us to have any clarity on the final outcome of the investigations,” Thomas O’Brien, Sterling’s chairman, president and CEO, said in the release. 

“We would hope to be able to report further on our progress during the third quarter, but we have no control over the timing, and much work still needs to be done,” O’Brien added. 

Sterling also said its bank, after consulting with the OCC, determined that its Advantage Loans should have a risk weighting of 100% under requirements set forth under the Basel III capital rules for first-lien residential mortgage exposures. 

The company had previously assigned those loans a 50% risk weight. 

Sterling said Advantage Loans made up 82% of its nonperforming assets on March 31. The company said $16.9 million, or roughly 38%, of those loans are paying and will likely be moved to accrual status in 2022. 

The company fired several employees and abruptly discontinued the low-documentation mortgage program in December 2019 after discovering alleged fraud. 

Sterling has also been operating under a formal agreement with the OCC since June 2019 tied to Bank Secrecy Act and anti-money laundering compliance.

O'Brien was hired in June 2020 to help the company address its issues.

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