A non-bank mortgage lender that specializes in loans for veterans was ordered to pay a $2.25 million penalty for allegedly misleading borrowers in three states.
The Consumer Financial Protection Bureau (CFPB) took action against New Day Financial, dba NewDay USA, based in West Palm Beach, Florida. The lender was found in violation of consumer protection laws for allegedly engaging in the practice of “loan churning” – aggressively pushing veterans to repeatedly refinance their VA home loans unnecessarily.
“NewDay USA baited veterans and military families into cash-out refinance mortgages by hiding the true costs of these loans,” said CFPB Director Rohit Chopra. “NewDay USA’s misconduct has no place in the VA home loan program.”
NewDay USA was ordered to pay the $2.25 million fine to the CFPB’s Victims Relief Fund. The order alleges NewDay misrepresented payment amounts on disclosures provided to consumers for cash-out refinance loans, making them appear less expensive than their original mortgages.
NewDay USA CEO Rob Posner issued a statement in response to the case, claiming the findings were the result of clerical errors.
“NewDay USA has been under CFPB scrutiny for nearly a decade, beginning with a 2015 inquiry, when the agency decided to create new law questioning our marketing partnership with the Veterans of Foreign Wars,” Posner said. “It was unprecedented. Today, after yet another exhaustive, government-funded investigation, the CFPB has unearthed nothing more than clerical errors that caused no financial harm to Veteran borrowers.”
The CFPB’s actions towards NewDay and other veteran-centric lenders have led many companies to leave the space, he went on to say.
“This outcome highlights an environment of regulatory overreach that further underscores why so many lenders have left the VA mortgage industry. While lenders like NewDay are working diligently to make it easier for Veterans and their families to manage their finances and achieve the American dream of homeownership, the CFPB is creating obstacles. Veteran families should expect more and deserve better.”
Specifically, NewDay included only the principal and interest payments when representing “new loan” amounts on borrower documentation, while reflecting the “previous loan” payment amount with principal, interest, taxes, and insurance. The company originated at least 3,000 cash-out refinances in North Carolina and Maine through 2020 and Minnesota through 2018, according to the CFPB, most of which included the misleading comparisons.
The company was charged previously by Ginnie Mae for concerns about loan churning. The CFPB’s previous action against New Day Financial in 2015 was for illegal kickbacks and misrepresenting another organization’s endorsement of NewDay USA products.
In addition to the monetary penalty, the CFPB’s order prohibits NewDay USA from misrepresenting facts about its mortgage loan products, including the monthly payment amount of any mortgage loan product or with misleading side-by-side comparison worksheets.
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Publish date : 2024-09-03 04:36:00
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