New Day Financial, also known as NewDay USA, was fined $2.25 million Thursday over deceptive activities targeting veterans seeking cash-out refinance loans, the federal agency charged with consumer financial protection said.
The Consumer Financial Protection Bureau (CFPB), calling the firm a “repeat offender,” said also that the bureau also took action against New Day Financial in 2015 for paying illegal kickbacks and deceiving borrowers about a veterans’ organization’s endorsement of NewDay USA products.
The CFPB said New Day Financial, LLC is a non-bank direct mortgage lender that specializes in offering mortgage loans guaranteed by the Department of Veterans Affairs (VA). It currently operates under the brand NewDay USA and uses patriotic imagery and other marketing tactics to build trust with military-connected families. Since at least 2015, the bureau said, NewDay USA has provided cash-out refinance loans to consumers, including veterans and active-duty servicemembers.
The bureau said that on “net benefit” analysis worksheets required in some states that include North Carolina, Maine, and Minnesota, NewDay USA gave borrowers misleading information about the costs of its cash-out refinances, omitting some items and making its loans seem less costly than the original ones. It said NewDay USA originated at least 3,000 cash-out refinances in North Carolina and Maine through 2020 and Minnesota through 2018, most of which included the misleading comparisons.
The CFPB found that NewDay USA engaged in deceptive acts and practices in violation of the Consumer Financial Protection Act of 2010. In addition to paying the $2.25 million civil money penalty, NewDay USA is required under Thursday’s order to stop misrepresenting loan costs to consumers.
The bureau also noted that the VA, CFPB and Government National Mortgage Association (Ginnie Mae, which guarantees mortgage loans made through VA home loan programs and others) have long been concerned about the practice known as loan “churning,” where lenders aggressively push veterans to repeatedly refinance their VA home loans, often unnecessarily. It said Ginnie Mae has previously taken action against a number of lenders – including NewDay USA – over such concerns.