On September 27, 2022, the Office of the Comptroller of the Currency imposed a $6 million penalty on Sterling Bank and Trust of Southfield, MI for engaging in unsafe and unsound banking practices, including violations of the Truth in Lending Act and Regulation Z. Between approximately mid-2011 and December 2019, the Bank:

  • Offered the Advantage Loan Program (“ALP”), a low-document mortgage loan program, which was the Bank’s primary loan product during this period. The Bank originated numerous ALP loans that had false or fraudulent loan applications. These loan applications contained falsified applicant income and employment information and debt-to-income ratios and relied on falsified supporting documents, such as verification of employment documents, letters of explanation, and gift letters. In addition, loan documents failed to disclose the use of third-party mortgage brokers. Despite deficiencies within the ALP, the Bank did not take appropriate corrective action and continued to grow the ALP.
  • Falsified applicants’ employment and income information as well as other supporting loan documents, in violation of California Penal Code § 532f and New York Penal Law Article 187.
  • Failed to make a reasonable and good faith determination of applicants’ ability to repay and to ensure that documents used to verify applicants’ employment, income, and assets were obtained from third parties, were reasonably reliable, and that there were proper quality control mechanisms to ensure the accuracy and reliability of the Bank’s loan documents, in violation of 12 C.F.R. § 1026.43(c).
  • Failed to properly disclose the involvement of, or fees paid to, third-party mortgage brokers on loan estimates and closing disclosures, in violation of 12 C.F.R. §§ 1026.19, 1026.37, and 1026.38.
  • Failed to implement an adequate system of BSA/AML internal controls and failed to file Suspicious Activity Reports in a timely manner, in violation of 12 C.F.R. §§ 21.21(d)(1) and 163.180(d).
  • Made false representations about the ALP loans to and concealed material information regarding the ALP loans from the Federal Home Loan Bank of Indianapolis, in violation of 18 U.S.C. § 1001.