Mortgage Lender to Pay $2.25 Million to Settle Alleged “Loan Churning” Practices Targeting Servicemembers and Veterans

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  • The CFPB reached a settlement with New Day Financial, LLC (NewDay), to resolve allegations that the non-bank mortgage lender violated the Consumer Financial Protection Act by misleading active-duty servicemembers and veterans seeking cash-out refinance loans.
  • According to the consent order, NewDay, which specializes in VA-guaranteed loans, targeted military members with misleading cost comparisons. The CFPB alleges that NewDay only included principal and interest in the “new loan” payment amount when comparing it to the “previous loan” amount, which included principal, interest, taxes, and insurance—making the new loans appear cheaper when they were often more expensive.
  • Under the terms of the settlement, NewDay will pay a $2.25 million civil penalty to the CFPB’s victims relief fund, is prohibited from misrepresenting loan facts, must implement a compliance plan, and is subject to reporting and recordkeeping requirements.
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