The Consumer Financial Protection Bureau (CFPB) has imposed a $2.25 million civil penalty on New Day Financial, operating under the brand NewDay USA, for deceiving veterans and active-duty servicemembers with misleading cost comparisons on cash-out refinance loans. The CFPB found that NewDay USA made these loans appear less expensive than they were, particularly in North Carolina, Maine, and Minnesota, by omitting certain costs in their comparisons. This led many borrowers to believe they were getting a better deal than they actually were.
CFPB Director Rohit Chopra emphasized the seriousness of the misconduct, stating, “NewDay USA baited veterans and military families into cash-out refinance mortgages by hiding the true costs of these loans. This kind of misconduct has no place in the VA home loan program.”
NewDay USA, a non-bank direct mortgage lender based in West Palm Beach, Florida, specializes in VA-backed mortgage loans. The company has been operating under the scrutiny of the CFPB since 2015, when the agency first investigated its marketing partnership with the Veterans of Foreign Wars. According to NewDay USA CEO Rob Posner, the CFPB’s recent findings stem from what he described as “clerical errors” that caused no financial harm to veterans, adding that the investigation was yet another example of regulatory overreach. Posner criticized the CFPB for creating obstacles in the VA mortgage industry, where he claims NewDay USA is working to help veterans and their families achieve homeownership.
The CFPB’s investigation focused on a single type of disclosure in three states, despite NewDay USA operating in 44 states and the District of Columbia. Posner pointed out that this specific disclosure was accurately reflected in several other federally mandated documents provided to borrowers.
The CFPB, VA, and Ginnie Mae have long been concerned about the practice of loan “churning,” where lenders push veterans to refinance their VA loans repeatedly, often unnecessarily, leading to higher overall costs for the borrowers. Ginnie Mae has previously restricted several lenders, including NewDay USA, from packaging and selling these loans to investors, as part of efforts to curb this harmful practice.
This recent penalty against NewDay USA underscores the ongoing tension between regulatory bodies and lenders in the VA mortgage industry. While the CFPB continues to enforce consumer protection laws, companies like NewDay USA argue that such regulations hinder their efforts to serve military families effectively.
Author: Jennifer Evancic
Jennifer.Evancic@ResourceManagement.com
Jennifer Evancic is a third-party auditor valued by creditors and large organizations for her knowledge in call monitoring within the collections industry. With meticulous attention to detail and a firm grasp of regulatory requirements, she ensures compliance with clients’ criteria and state and federal regulations.
Jennifer audits collections calls, ensuring they meet client-specific criteria and comply with regulations, providing valuable insights and maintaining industry standards.
Beyond her auditing responsibilities, Jennifer takes the lead in organizing and facilitating monthly call calibrations. These sessions serve as a collaborative forum where clients and their vendors come together to discuss call monitoring results and address any findings or areas for improvement. Jennifer’s guidance fosters open communication and ensures alignment between clients and vendors, driving continuous improvement in collections practices.
Jennifer stays up-to-date with compliance and industry best practices by participating regularly in peer meetings, regulatory updates and industry webinars. This keeps her informed about emerging issues and ensures she remains a knowledgeable leader in collections compliance.
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