The Consumer Financial Protection Bureau (CFPB) has taken action against mortgage lender NewDay USA, ordering it to pay $2.25 million for deceiving military families and veterans. The lender was found guilty of using misleading tactics to make its cash-out refinance loans appear more affordable than they actually were, leading to serious financial consequences for borrowers.
NewDay USA’s Misleading Comparisons
NewDay USA, which operates as a non-bank mortgage lender specializing in VA-backed loans, gave borrowers inaccurate cost comparisons between their current loans and NewDay’s refinancing options. Specifically, the company compared the principal and interest payments on its new loans with the full mortgage payments—including taxes and insurance—of existing loans. This made NewDay’s loans appear cheaper, when, in reality, they were often more expensive.
Since 2015, NewDay USA has targeted military families and veterans with cash-out refinance loans, which allow borrowers to replace their existing mortgages with larger loans. The lender’s use of patriotic imagery and trust-building marketing tactics made it appear as a veteran-friendly business, but its deceptive practices tell a different story.
Loan Churning: A Larger Problem
The CFPB’s action against NewDay USA highlights a broader issue in the mortgage industry known as loan “churning.” This practice involves repeatedly encouraging borrowers, particularly veterans, to refinance their VA home loans unnecessarily. Lenders profit from fees and by selling these loans on the secondary market, while borrowers often end up with worse financial terms and higher costs.
NewDay USA is no stranger to scrutiny over its refinancing practices. Ginnie Mae, the government agency that guarantees VA home loans, has previously restricted NewDay’s ability to sell refinanced loans to investors due to concerns over aggressive loan churning. This practice has become a focus for both Ginnie Mae and the Department of Veterans Affairs (VA), both of which are working to protect veterans from being caught in cycles of expensive refinancing.
CFPB’s Enforcement Action
In addition to the $2.25 million fine, the CFPB’s order requires NewDay USA to stop misrepresenting the costs of its loans. The company can no longer use misleading side-by-side comparisons in its marketing materials and must provide clear, accurate information about the true costs of its mortgage products.
This action follows a previous CFPB fine in 2015 when NewDay USA was found guilty of paying illegal kickbacks and deceiving borrowers about endorsements from veterans’ organizations.
Conclusion
The CFPB’s enforcement against NewDay USA sends a clear message that deceptive lending practices targeting veterans will not be tolerated. The $2.25 million fine and corrective measures aim to protect military families from being misled by unfair mortgage practices. As loan churning continues to be a concern, veterans are encouraged to use resources like the CFPB to report misconduct and safeguard their financial futures.
