Modals (overlayLibrary) and multi line strings

In $A.createComponents, create an additional component: aura:unescapedHtml for instance; to generate the appropriate HTML and use it as modal header. Example here:

({
    handleShowModal: function(component, evt, helper) {
        var modalHeader;
        var modalBody;
        $A.createComponents([
            ["aura:unescapedHtml", {
                "value": "<h1>Confirmation?</h2><br/>Please click to confirm!"
            }],
            ["c:modalContent",{}]
            ],
            function(components, status){
                if (status === "SUCCESS") {
                    modalHeader = components[0];
                    modalBody = components[1];
                    component.find('overlayLib').showCustomModal({
                        header: modalHeader,
                        body: modalBody, 
                        showCloseButton: true,
                        cssClass: "my-modal,my-custom-class,my-other-class"
                    })
                }
            }
       );
    }
}) 

$A.createComponent as per the previous answer above is great , However we can further improvise this using the lightning:formattedRichText. The advantage of using lightning:formattedRichText over aura:unescapedHtml is it automatically takes care of XSS by sanitizing the value passed to it.Read more here

The below code works

({
handleShowModal: function(component, evt, helper) {
    var modalHeader;
    var modalBody;
    $A.createComponents([
        ["lightning:formattedRichText", {
            "value": "<h1>Confirmation?</h2><br/>Please click to confirm!"
        }],
        ["lightning:formattedRichText",{"value": "aaa <br/> bbb"}]
        ],
        function(components, status){
            if (status === "SUCCESS") {
                modalHeader = components[0];
                modalBody = components[1];
                component.find('overlayLib').showCustomModal({
                    header: modalHeader,
                    body: modalBody, 
                    showCloseButton: true,
                    cssClass: "my-modal,my-custom-class,my-other-class"
                })
            }
        }
   );
   }
})