Last week, the Consumer Financial Protection Bureau (CFPB or Bureau) announced it had entered into a consent order with NewDay USA, a Florida-based non-bank direct mortgage lender, over allegations that the lender misled veterans and military families about the costs associated with cash-out refinance loans. According to the Bureau, NewDay USA gave misleading and incomplete cost comparisons to borrowers refinancing in North Carolina, Maine, and Minnesota, which made the company’s loans appear less expensive relative to the borrowers’ existing mortgages.
NewDay USA specializes in offering mortgage loans guaranteed by the United States Department of Veterans Affairs (VA). In the consent order, the CFPB claimed that NewDay USA included only the principal and interest payments in the “new loan” payment amount listed on disclosures provided to consumers. This was then compared side-by-side with the “previous loan” payment amount, which included principal, interest, taxes, and insurance. This misleading comparison gave borrowers the false impression that a new loan would be more affordable.
The consent order requires NewDay USA to:
- Pay a $2.25 Million Fine: The penalty will be directed to the CFPB’s victims relief fund.
- Cease Misrepresentation: NewDay USA is prohibited from misrepresenting facts about its mortgage loan products, including the monthly payment amount or using misleading side-by-side comparison worksheets.
This is not the first time the CFPB has acted against NewDay USA. In 2015, the CFPB entered into a consent order with the mortgage lender for allegedly paying illegal kickbacks and deceiving borrowers about a veterans’ organization’s endorsement of NewDay USA products.
