Maryland-based non-bank mortgage lender NewDay Financial will pay $1 million to settle allegations brought by the New York State Department of Financial Services (NYDFS) that its loan officers (LOs) failed to take the mandated continuing education courses and exams, with the company's compliance staff taking the required courses and exams for them.
In addition to the $1 million fine, the NYDFS has ordered NewDay to surrender its New York state mortgage banker's license.
The NYDFS says that at least 20 employees were involved in the continuing education scheme. Further, NYDFS officials say company executives were aware that compliance staff was sitting in for some of the loan originators during some of the classes.
‘These exams are important because they help ensure that LOs know and follow the law and do not abuse homeowners,’ says Anthony J. Albanese, acting superintendent of financial services, in a release. ‘The type of dishonest conduct uncovered in this case is simply unacceptable and will not be tolerated in New York.’
The NYDFS also charged NewDay with other compliance failures, including the improper issuance of subprime home loans and misrepresentation of loan terms.
In February, the Consumer Financial Protection Bureau fined NewDay Financial, owned by Chrysalis Holdings, for $2 million for allegedly engaging in deceptive mortgage advertising and kickbacks.
The lender, which primarily originates refinance loans guaranteed by the Veterans Benefits Administration, deceived consumers about a veterans' organization's endorsement of NewDay products and participated in a scheme to pay kickbacks for customer referrals, according to the bureau.
In April, the company agreed to a $5.2 million settlement with 43 state mortgage regulators related to cheating on originator testing.
In a statement, officials with NewDay defended the company's reputation and its actions.
‘Our borrowers, employees and business partners know just how committed our leadership team is, and has always been, to ensuring everything we do at NewDay USA is done with the best interests of our nation's veterans in mind,’ company officials say in the statement. ‘As we already stated six months ago when this issue was first reported, as soon as we became aware of the wrongdoing, we initiated an internal investigation, self-reported the issues to our regulators and took aggressive steps to correct the mistakes and ensure they can never be repeated.
‘We did all of these things because we have a responsibility to our nation's veterans to always act with integrity in everything we do,’ officials add. ‘In fact, the vast majority of the issues raised by NYDFS, with the exception of a few matters from an exam almost four years ago, were fully addressed and resolved six months ago as part of a previously announced comprehensive agreement with a 43-state coalition.
‘Unfortunately, New York regulators have chosen to self-select certain historical issues, rather than recognize the efforts made by the company to improve our operations. NewDay has used every resource at its disposal to continue to strengthen and build the company for the future. We not only stand by our management team, [but] we are supremely confident in their ability and commitment to lead this company.’