Maria Vullo, Superintendent of the New York State Department of Financial Services (NYLJ/Rick Kopstein)
A mortgage lending company marketing to veterans has been ordered to pay more than $600,000 in restitution to New York State customers and a $500,000 fine to the state, regulators announced Thursday.
Mortgage Research Center LLC, of Columbia, Missouri, doing business as VAMortgage Center and Veterans United Home Loans, has been ordered to pay $604,000 to its customers, primarily military veterans in New York as part of a consent order with the state Department of Financial Services.
An examination of Veterans United conducted between January 2011 and June 2014 found that the company did not refund lender credits to New York borrowers who had gotten a credit from Veterans United to cover the estimated costs of closing by agreeing to a higher interest rate.
The final closing costs were in fact much lower than what had been estimated, according to DFS. Veterans United didn’t adjust the interest rate downward or reduce the principal balance of the loan. The company also did not reduce payments, provide a cash refund or “pursue any other means of refunding the surplus to the borrower,” DFS said.
According to the consent order, signed by DFS superintendent Maria Vullo on Aug. 10, the total surplus lender credit retained by Veterans United for the 322 loans within New York during the examination period was $360,286.
As of June 2014, when the examination period by DFS ended, the company stopped retaining surplus lender credits for new loans in New York as part of an agreement between the company’s investors to principal reductions.
In response to a request for comment, a spokeswoman for Veterans United said, “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. 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. 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.”
In a statement, Vullo said lenders shouldn’t take “advantage of the moving parts of the loan origination process in order to obtain hidden profits at their customers’ expense.”
“New York borrowers—and New York veterans in particular—must be confident that they will get what they pay for from their mortgage lenders. Mortgage lenders have a responsibility to make sure their borrowers receive the full benefit of their agreements with their lenders,” Vullo added.
As part of the settlement, Veterans United will send customers a full restitution via check, which will include a 9 percent interest. The company will also have to pay an estimated restitution to customers whose records were lost and a $500,000 fine to the state.
Mortgage Research Center doing business as Veterans United also entered into a consent order with banking regulators in Massachusetts for $750,000 in 2014 without admitting any wrongdoing.
A spokesman for the Department of Financial Services declined to say whether the department is investigating other mortgage lending companies for similar practices.