NewDay Financial found itself embroiled in another regulatory order, this time stemming from allegations of rampant cheating on mortgage licensing examinations by company employees, including its chief operating officer.
The Multi-State Mortgage Committee issued the
The test-cheating investigations were sparked by complaints filed by a former employee, and regulators found that NewDay violated the Nationwide Multi-State Licensing System and Registry Rules of Conduct for Test Takers or Education Students in multiple ways.
The findings showed that NewDay employees would take and store test information to teach co-workers what was being examined.
NewDay is owned by Chrysalis Holdings. In March 2013, the private equity firm
The investigations also found that members of the compliance staff at NewDay would often take continuing education courses and exams on behalf of other employees including chief executive Robert Posner and chief operating officer Paul Alger, sometimes for compensation.
The order stipulated that Alger be removed and replaced, as he was aware of the improper practices. Posner, meanwhile, maintained that he was unaware of the educational requirements and did not know that company employees were taking his courses for him.
Amidst the investigations led by state regulators, the company said it conducted its own internal inquiry into the allegations, and has instituted a number of remedial measures, including requiring employees with educational requirements for 2013 to retake the courses with a third-party vendor. The company also set up an anonymous tip line for compliance concerns and established a whistleblower policy to encourage reporting of violations.
"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 Financial said in a statement. "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."
Additionally as a result of the internal investigation, the company fired numerous senior managers and employees including its head of recruiting and vice president for sales. The head of the reverse mortgage division also resigned. The Maryland investigation found that one of these employees was rehired as a part-time consultant and that others were subsequently employed by NewDay's parent company, Chrysalis Holdings, but did not specify who in each case.
Beyond Alger's termination and the hefty fine, the regulatory order stipulated the hiring of an independent auditor to evaluate NewDay's training and education program. A report on NewDay's progress will be issued 270 days after the auditor's appointment, with another one to follow yet another 270 days later.
The consent order follows
