In a filing dated Jan. 4, the state claimed Loansnap used unlicensed mortgage originators between August and December 2022, when they accepted applications, solicited potential borrowers and offered or negotiated residential loan terms in violation of both the federal Secure and Fair Enforcement for Mortgage Licensing Act, or SAFE, and state laws.
The Costa Mesa, California-backed company "employed a business model by which the bulk of the origination work was performed by unlicensed mortgage loan originators, generally titled as 'Sales Development Representatives' or 'Call Center Representatives,'" the filing stated.
Unlicensed staff members would discuss available loan products offered by Loansnap and make a determination if there was an option available to the customer, passing information about "qualified" borrowers to a licensed officer.
If they saw no "beneficial options" available to fit the customer's needs, staff would inform the client and end correspondence without sending them to a licensed originator but keeping their name on file for future opportunities, the filing said. The disqualification of potential borrowers without any issue of adverse action notices also ran afoul of the Fair Credit Reporting Act, Connecticut officials said.
Noting that the unlicensed activity was "systemic" in his order, Connecticut Banking Commissioner Jorge Perez also pointed to Linkedin social media profiles of some Loansnap sales development representatives, where their job descriptions indicated they engaged in the type of work typically designated only for licensed officers, including qualifying or pre-qualifying customers.
Additionally, the state alleged Loansnap violated the Truth in Lending Act when unlicensed employees asked potential clients to provide documentation, including bank statements and paystubs, before issuing any loan estimates.
The banking commissioner issued a temporary order for Loansnap to immediately cease and desist using unlicensed employees for originations and notified it intended to revoke and refuse the lender's application for license renewal. He is also authorized to impose civil penalties of no more than $100,000 per violation.
The nature of the allegations point to regulations lenders will not be able to ignore with more prevalent use of outside call centers and the proliferation of social media, according to the law firm Bradley.
"This order serves as an important reminder that the use of call centers in mortgage loan origination, as well as other remote activities in mortgage loan origination that have become more commonplace over the past several years, carry certain compliance risks," wrote attorneys Joe Wilson and Andrew Narod in a legal post.
They also emphasized the importance of training unlicensed employees who engage with consumers in federal and state laws.
Of particular note was also how Loansnap employees presented themselves, they said.
"These representations were important in the examination and subsequent order against LoanSnap because Connecticut law provides that an individual is deemed to be engaged in the business of a mortgage loan originator if he or she 'makes any representation to the public through advertising or other means of communication that such individual can or will act as a mortgage loan originator on behalf of a licensee.'"
Loansnap was given 14 days upon receipt of the order to request a future hearing on the allegations. A request sent to Loansnap for comment had not been received by National Mortgage News before publication.
But correspondence in summer 2023 between Connecticut banking officials and Loansnap about possible noncompliance of the SAFE Act resulted in a written response from the lender "denying, in large part, the allegations asserted," the filing said.
Upon review by Connecticut's department of banking, the response was deemed to be "unpersuasive."
In recent years, Connecticut has taken a leading role on the interpretation and regulation of the SAFE Act, in part due to
In a separate case, the Consumer Financial Protection Bureau
