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New Day Financial, LLC, Fulton, MD, Ensured Loans Met FHA Requirements

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We reviewed 32 Federal Housing Administration (FHA) loans that New Day Financial, LLC, underwrote as a U.S. Department of Housing and Urban Development (HUD) FHA direct endorsement lender. We conducted the review as a result of a risk model assessment that identified mortgage lenders that were at high risk to cause losses to the FHA insurance fund. New Day was one of the lenders identified that made insurance claims within the first 2 years of insurance endorsement and underwrote loans that went into default within the first 90 days of endorsement. Our objective was to determine whether New Day underwrote the loans in accordance with FHA requirements and if not, whether the underwriting reflected systemic problems.

New Day underwrote 31 of the 32 refinanced loans we reviewed in accordance with FHA requirements. The one loan with underwriting deficiencies had an original mortgage amount totaling $192,850 and was refinanced as cash-out refinance debt consolidation loans. HUD classifies these loans as considerable risk. The FHA insurance fund suffered actual losses of $99,502 on the one loan. However, this problem did not appear to be systemic and we determined that there was insufficient cause to pursue remedies under the Program Fraud Civil Remedies Act. There are no recommendations contained in this audit memorandum.