Mortgage Research Center, which does business as Veterans United Home Loans and VAMortgage Center, will pay more than $1.1 million to settle allegations that the lender overcharged on loans primarily insured by the Department of Veterans Affairs.
The New York Department of Financial Services announced the settlement this week, stating that a department investigation found that Veterans United did not refund surplus “lender credits” on at least 322 loans from January 2010 through June 2014.
According to the NYDFS, its investigation found that Veterans United did not refund borrowers who obtained a credit from the lender to cover estimated closing costs by agreeing to a higher interest rate, when the actual closing costs turned out to be lower than the estimated costs.
The NYDFS said that Veterans United did not adjust down the interest rate, reduce the principal balance of the loan, reduce the down payment, provide a cash refund, or pursue any other means of refunding the surplus to the borrower, as it should have in these cases.
In a statement, the company said that the settlement was the result of a small technical issue that the company remedied several years ago, adding that each borrower received loan terms that were previously communicated.
“We are dedicated to the highest level of customer service for Veterans and military spouses. We voluntarily agreed to this settlement to bring closure to an examination going as far back as 2011,” Veterans United Home Loans Director of Communications Lauren Karr said in a statement to HousingWire.
“The Department of Financial Services’ finding was related to a technical disclosure issue, which we recognized and modified – of our own initiative – more than three years ago,” Karr continued. “At all times each borrower received terms that matched or were better than what were presented on the good faith estimate, and we remain committed to continuous review and improvement of our processes to better serve our customers.”
As part of the settlement, Veterans United will pay approximately $604,000 in restitution to the affected New York borrowers, many of whom are military veterans, plus a $500,000 penalty to the state of New York.
According to the NYDFS, the amount of restitution is higher than the amount of surplus credit retained by the lender, which was determined to be $360,286.39.
As part of the settlement, Veterans United will pay full restitution to all known affected consumers via check, including 9% interest, and estimated restitution to consumers whose records have been lost, which is expected to equal approximately $604,000.
Veterans United also agreed to ensure that going forward, any surplus lender credit is immediately returned to the borrower via cash payment or reduction in the principal balance of the loan.
According to the NYDFS, Veterans United stopped retaining surplus lender credits for new loans it originated in New York in June 2014 after obtaining agreement from investors to principal reductions.
After June 2014, when a surplus lender credit occurred on a loan, Veterans United has in “all cases” reduced the principal balance of the loan in the amount of the surplus lender credit, or returned the surplus lender credit to the borrower via other means, the NYDFS said.
But, the NYDFS consent order notes that if Veterans United begins unnecessarily retaining lender credits again, the company could face additional sanctions.
“While we appreciate Veterans United’s willingness to make its customers whole, we emphasize that lenders must not take advantage of the moving parts of the loan origination process in order to obtain hidden profits at their customers’ expense,” NYDFS Superintendent Maria Vullo said.
“New York borrowers – and New York veterans in particular – must be confident that they will get what they pay for from their mortgage lenders,” Vullo added. “Mortgage lenders have a responsibility to make sure their borrowers receive the full benefit of their agreements with their lenders. DFS will continue to take aggressive action to protect consumers in their financial services needs.”
[Update 1: This article is updated with a statement from Veterans United.]