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LoanSnap, a fintech mortgage lender founded in 2018 with the promise of helping consumers tap into their home equity to pay off high-interest debt, had its license revoked in Connecticut and released in California. State regulators have also notified us that they intend to take similar action.
The Costa Mesa, California-based financial company has raised millions of dollars in venture capital from funds associated with celebrities such as Richard Branson, Joe Montana and LinkedIn co-founder Reid Hoffman. But most of that business dried up last year.
LoanSnap was evicted from its headquarters in May and is also facing a lawsuit from creditors, according to Connecticut regulators, who issued a cease-and-desist order against the company in January. His license in the state was suspended in July.
Loansnap did not respond to Inman’s request for comment. consent order with the Connecticut Department of Banking on October 2nd.
Connecticut regulators alleged that the company employed call center representatives who acted as unlicensed mortgage loan originators, accepting loan applications, offering and negotiating loans, and denying loans to some borrowers. .
Although LoanSnap entered into the consent order “without admitting or denying any allegations,” the company also did not make any public statements “directly or indirectly denying any allegations,” or They also agreed that it should not give the impression that [the] The consent order has no factual basis. ”
Riding the pandemic refi boom
After acquiring existing mortgage lender DLJ Financial and launching in 2018, LoanSnap’s business lagged. The company originated just 380 loans totaling $131.7 million in 2019, according to the Consumer Financial Protection Bureau. database.
But when mortgage rates plummeted to historic lows during the pandemic, LoanSnap’s business took off. in 2020 and 2021LoanSnap reported originating 2,164 loans totaling $822 million.
in announcement LoanSnap, which raised $10 million in venture funding in May 2020, is the world’s first smart company that uses artificial intelligence to analyze a person’s financial situation and show an easy way to benefit from smarter loans. He claimed to have invented “loan technology”.
The round was co-led and followed by True Ventures and MANTIS, an investment firm founded by EDM-pop duo The Chainsmokers. $30 million Series Band previous investments by Richard Branson’s Virgin Group and Joe Montana’s Liquid 2 Venture.
LoanSnap attracted prominent investors
LoanSnap offered cash-out refinances and home equity lines of credit (HELOCs), encouraging consumers to consolidate high-interest debt into loans secured by their homes to obtain lower interest rates.
“Interest rates on credit cards, student loans, and auto loans can be much higher than mortgage rates,” LoanSnap continues to market to consumers. Website today. “Most people don’t realize they can save thousands of dollars in interest payments by transferring their credit cards or loans to a mortgage. However, customers end up losing money because they don’t have complete visibility into their financial situation.”
However, as mortgage rates began to rise in 2022, the refinance boom that the entire mortgage industry was enjoying began to dry up. According to the paper, LoanSnap’s number of loans that year fell to 567, totaling $210 million. CFPB database.
LoanSnap was born last year 42 loans totaling $3.59 million — Average balance per loan is $85,476. Lenders rejected 12 applications and borrowers who submitted 68 applications totaling $10.25 million withdrew their applications.
Connecticut Department of Banking Examination
LoanSnap’s troubles with Connecticut regulators — First reported by TechCrunch — Date of investigation initiated by the Consumer Credit Division of the Connecticut Department of Banking in July 2022.
their initials, stop command In a lawsuit filed against the company in January, Connecticut regulators said LoanSnap’s nationwide business model involved hiring salespeople to perform tasks that only legally licensed mortgage originators could perform. claimed to be dependent on.
Their tasks include accepting loan applications, gathering financial information such as bank statements, W-2s, tax returns, and pay stubs, and advising prospective borrowers about their options.
After reviewing records such as mortgage files and payroll records and listening to recorded calls with consumers in Connecticut and other states, bank investigators found that unlicensed LoanSnap call center agents were responsible for receiving calls from companies such as LendingTree. They concluded that the leads were used to make outbound calls to potential borrowers.
According to Connecticut regulators, LoanSnap call center agents will first determine whether a borrower qualifies for a loan product and advise them of their options before sending them to a licensed mortgage originator.
“As a result of the inspection, if you are unlicensed, [salesperson] If the regulator determines that a respondent does not have a “beneficial alternative” for the potential borrower, it will advise the potential borrower accordingly and recommend that the potential borrower be directed to a licensed mortgage originator. and would end the call without giving me a chance to speak.
Instead, the examiners said that for prospects they deemed ineligible, a “senior mortgage banker” would “review their file and, if they determined there were ‘profitable options,’ He said he was advised to contact the borrower and effectively deny credit to the potential borrower. ”
LoanSnap reduced demand for hearings
Connecticut regulators said Loansnap responded in writing on Aug. 18, 2023, “substantially rejecting” the examiner’s findings, which regulators found “unpersuasive.”
in May 15, 2024 Consent OrderLoanSnap agreed to pay a $75,000 civil penalty and requested a formal hearing in hopes of keeping its license.
However, Loansnap withdrew its request for a hearing in Connecticut and agreed to a consent order on October 2nd.
According to this recent order, the Connecticut Commissioner of Banks issued LoanSnap’s license for moving its California headquarters without filing a change of address with the National Multistate Licensing System and Registry (NMLS) within 30 days. automatically stopped on July 11th.
LawnSmart’s landlord, MGR OC1 LLC, sued the company in Orange County in February for owed $537,304 in past due rent, and the sheriff’s office raided the property on May 16, according to Connecticut regulators. It is said that he obtained an eviction.
According to the consent order, Loansnap’s license was also subject to automatic suspension because it failed to provide bond riders or endorsements for bonds registered with the state. On July 24, Connecticut regulators announced that they had received notice from Loansnap’s surety bond provider, Cincinnati Insurance Company, that the company’s bonds would be canceled on August 24.
Connecticut regulators also alleged that Loansnap falsely stated that it had no unfavored judgments or liens when it applied for license renewal in December. However, on November 7, Wells Fargo won a $431,511 judgment against LoanSnap in a breach of contract lawsuit over mortgages that LoanSnap sold to banks.
The consent order also details legal actions by creditors including Optimal Blue, Mortgage Capital Trading, Anderson Tax LLC and South Street Securities, some of which stem from license renewal requests. It had been done before.
In summing up LoanSnap’s revocation case, Connecticut regulators wrote that LoanSnap “has earned the confidence of the community for its financial responsibility, character, and general fitness, and that LoanSnap is an honest, fair and efficient company.” “We have not been able to demonstrate that this is sufficient to warrant our determination to operate in a consistent manner.” Company license.
In discussions with Connecticut regulators, “In lieu of revocation, LoanSnap sought to negotiate the return of its license to practice as a mortgage lender in Connecticut,” the consent order states. “Loansnap has been advised that due to the significant nature and scope of the allegations described above, any surrender request will not be honored.”
California regulators on Aug. 19 notified LoanSnap of their intention to revoke the company’s mortgage lending license in the state, citing the impending Aug. 4 guarantee deadline.
Are you still open?
Calls to LoanSnap Friday were not returned, and the company did not respond to an email request for comment from Inman. Although the company’s website shows it remains open for business, clicking the “Get Started” button when applying for one of LoanSnap’s “SMART Loans” results in an error.
According to Connecticut regulators, Loansnap was licensed to operate mortgage loans in about 40 states in August 2023. NMLS records show LoanSnap is currently licensed in 13 states, including California, and sponsors six mortgage originators.
in Website FAQLoanSnap says its services are available in 29 states: Alabama, Arkansas, Arizona, California, Colorado, Florida, Georgia, Iowa, Idaho, Illinois, Indiana, Kansas, Louisiana, Maryland, Michigan, Nebraska, New Hampshire, New Jersey, and New Jersey. It is said to be available at. Mexico, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Washington, and Wisconsin.
“If you live outside of these states, we are expanding as quickly as possible and hope to have it available in your state soon,” the website states.
Connecticut regulators also alleged that “LoanSnap advertised to consumers on its website that it was licensed in states where it was not licensed.”
In February, LoanSnap announced that it had been accepted for Visa review. fintech fast track The program is described by the credit card giant as “a program designed to help fintech and crypto companies bring new payment solutions to market.”
“This unique achievement marks a significant milestone in the mortgage industry and places Loansnap at the forefront of fintech innovation,” said Loansnap. press release.
loan snap announced joined in April NVIDIA InceptionThe program says the chipmaker created it “to help startups evolve faster through cutting-edge technology, opportunities to connect with venture capitalists, and access to NVIDIA’s latest technology resources.” .
Visa and NVIDIA did not respond to Inman’s requests for comment regarding Loansnap’s continued participation in the program.
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Email Matt Carter