HousingWireHousingWire
Florida-based V.A.-focused mortgage lender NewDay USA has reached an agreement with the Consumer Financial Protection Bureau (CFPB) over allegations that it provided misleading and incomplete cost comparisons to borrowers seeking cash-out refinance loans, the parties announced on Thursday.
The deal, which includes a $2.25 million civil penalty, was reached without the company admitting or denying any of the findings, according to the consent order. NewDay USA wrote in a statement to HousingWire that the settlement is over “minor reporting errors that caused no financial harm to Veteran borrowers.”
The CFPB alleges that NewDay provided borrowers with “net benefit worksheets”—which show the financial advantage of a transaction—misstating the changes in the monthly mortgage payments before and after the refinancing loan.
The monthly payment before the refinancing included principal, interest, taxes, and insurance, while the monthly payment after the transaction would include only principal and interest. This made NewDay USA cash-out refinance loans appear less expensive relative to consumers’ original mortgages, which was not the case for many consumers, the CFPB stated.
According to the consent order, the worksheets with the error were provided to borrowers in North Carolina and Maine up through 2020 and Minnesota up through 2018, encompassing 3,000 loans.
The CFPB stated that consumers may have received several other federally mandated disclosure documents with accurate cost information but raised concerns about “churning,” which happens when lenders repeatedly push veterans to refinance their V.A. home loans.
“NewDay USA baited veterans and military families into cash-out refinance mortgages by hiding the true costs of these loans,” CFPB Director Rohit Chopra said in a statement. “NewDay USA’s misconduct has no place in the V.A. home loan program.”
That’s the second case involving the CFPB and NewDay USA. In 2015, the watchdog took action against the lender for allegedly “paying illegal kickbacks and deceiving borrowers about a veterans’ organization’s endorsement of NewDay USA products,” the agency said.
NewDay USA CEO Rob Posner wrote in a statement that the company has been under CFPB scrutiny for nearly a decade, starting in 2015, when “the agency decided to create a new law questioning our marketing partnership with the Veterans of Foreign Wars. 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,” Posner said. “This outcome highlights an environment of regulatory overreach that further underscores why so many lenders have left the V.A. mortgage industry.”
Florida-based NewDay USA, which focuses on Department of Veteran Affairs (V.A.) loans, had 160 active loan officers and licenses in 44 states and the District of Columbia as of Wednesday, per the Nationwide Multistate Licensing System (NMLS).
According to mortgage tech platform Modex, the lender has produced $1.25 billion in mortgages over the last 12 months, more than 86% of which are V.A. loans and 90% refinance loans.
An attorney close to the inquiry told HousingWire that the NewDay USA “has produced tens of thousands of documents and have been turned upside down, but the CFPB came up with minor state-based administrative or clerical findings.”
“There are between six and eight documents that accurately depict the loan, and the CFPB, to their credit, concluded in the consent order that several other federally mandated documents accurately conveyed the cost of the loan. It’s also important to note that the company is not paying restitution: no harm’s been done to a consumer,” the attorney added.
