) -- Foreclosure costs will increase at

SunTrust Banks

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this year and the bank expects increased expenses as it rejiggers its process for handling past due mortgages, according to a filing with the

Securities Exchange Commission.

"We expect that our costs will increase modestly in 2011 as a result of the additional resources necessary to perform the foreclosure process assessment, revise affidavit filings and make any other operational changes," the filing says. The bank added that foreclosure expenses may rise due to the length of time it is taking for U.S. courts to processing foreclosure claims.

SunTrust also said in the filing that it expects home prices to, "remain soft, trending down in some markets," and there will be less default in the residential mortgage portfolio.

"We believe that lower expected default frequency and moderating loss severity will produce stable to modestly declining nonperforming loan and charge-off levels over the near term," the filing adds.

The bank believes that its commercial construction portfolio could continue to decline, even though the bank is working under stricter requirements for loans. "We expect quarterly variability in losses as we continue to work through the remaining risk in this runoff portfolio," says the filing.

The regional bank has been struggling with commerical and residential loan losses in the southeastern U.S. since the financial crisis. Analysts and SunTrust's CEO both expect the bank to be able to pay back $5 billion in TARP sometime after the

stress tests results come out in March.

--Written by Maria Woehr in New York.

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