It is penalized for baiting veterans into costly refinance deals
The Consumer Financial Protection Bureau (CFPB) has ordered VA lender NewDay USA to pay a $2.25 million fine for allegedly misleading veterans and military families into costly cash-out refinance loans.
The CFPB claims that NewDay USA provided deceptive cost comparisons, making their loans appear cheaper than they actually were, ultimately luring borrowers into unfavorable deals. The Florida-based nonbank mortgage lender has long marketed its services to veterans and military families, using patriotic themes to build trust.
However, the CFPB found that the company misled borrowers by showing only principal and interest payments for their “new loans,” while including taxes and insurance in the “previous loan” payments. This side-by-side comparison made the new loans seem more affordable, even though they were often more expensive overall, it was suggested.
“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 VA home loan program.”
This alleged deceptive practice affected more than 3,000 cash-out refinances in states like North Carolina, Maine (the safest state to live in), and Minnesota, where these comparisons were used extensively.
NewDay USA was keen to emphasize that no veterans, veteran families, or customers of any kind were financially harmed – and as such there was no requirement of restitution. It noted that the agency’s inquiry “focused on a single type of disclosure that was accurately provided to these consumers on a half-dozen other federally mandated disclosures and closing documents.”
Ginnie Mae had previously limited NewDay USA’s ability to package and sell loans to investors, as part of broader efforts to protect veterans from financial harm.
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This is not the first time NewDay USA has faced regulatory action. In 2015, the CFPB penalized the company for paying illegal kickbacks and misleading borrowers about endorsements from veterans’ organizations.
Under the current enforcement action, NewDay USA is required to pay the $2.25 million fine into the CFPB’s victims relief fund. Additionally, the company is barred from misrepresenting loan costs in the future, including using misleading comparison worksheets that obscure the true costs of their mortgage products.
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