A coalition of state mortgage regulators has announced a Settlement Agreement and Consent Order with former top-15 reverse mortgage lender NewDay Financial, LLC, for allegedly violating mortgage licensing and testing rules.
As a result of investigations, the head of NewDay’s reverse division resigned at the time, and several senior managers and employees were fired, resigned or retired.
The settlement agreement comes two years after a former NewDay employee filed a complaint with the State Regulatory Registry, alleging that employees of the company had violated the Nationwide Mortgage Licensing System & Registry (NMLS) by providing or receiving assistance on and misusing study materials for the SAFE mortgage loan originator testing program.
One investigation determined that at least 20 NewDay employees had continuing education requirements taken for them by other employees, and that this practice had begun as early as December 2005. Among those whose courses had been taken for them were NewDay CEO Robert Posner and Chief Operating Officer Paul Alger, according to the agreement.
The consent order, issued this week by the Multi-State Mortgage Committee (MMC) which coordinated the investigations, requires NewDay to remove and replace Alger as COO; hire an independent auditor to evaluate NewDay’s policies and procedures, and to review the company’s training and education program; file a report within 270 days identifying the manner in which the company proposes to improve its corporate management and governance structures; and pay an administrative penalty of $5.28 million.
The resolution will permit NewDay to continue to operate, while remaining compliant with all state and federal laws, according to Karyn Tierney, deputy commissioner of the Arkansas Securities Department and chair of the MMC, which included 43 state mortgage regulators.
“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,” NewDay wrote in a statement sent to RMD. “To be clear, while we take this issue seriously, we also believe it is important to note that there was not a single suggestion of direct harm to our borrowers.”
Previously, NewDay operated as a lender in the reverse mortgage space, but exited in 2013 in the wake of then-upcoming changes to the home equity conversion mortgage (HECM) program.
Access the settlement agreement and consent order here.
Written by Emily Study