Mortgage

1st Alliance tries to get Conn. Meet the deadline for deciding on LO licensing

1st Alliance Lending, which closed in 2019 due to an unresolved regulatory dispute with Connecticut, added a new legal complaint on Tuesday to the broader range of litigation previously filed.

The new complaint, filed with the Connecticut Supreme Court, aims to enforce a short-term ruling on allegations that were first made in 2018. It seeks to enforce a statutory deadline stating that the final decisions will be taken 90 days after the end of the taking of evidence or the due date for filing pleadings, whichever is later. "

Connecticut announced last week that it would extend a January 18 deadline – set in line with the 90-day decision-making rule – for an additional three months, based on an executive order that allows such extensions if so due to Pandemic is deemed necessary. There were several other delays in the process, but this was the first request to postpone this specific deadline based on the October 19th filing due date.

The 1st Alliance's action on Tuesday challenged claims that there was a valid reason for the delay.

“Executive Order 7M limits the extension of the“ Regulatory Administrative Deadlines ”to situations in which such extensions“ are reasonably necessary to respond to the COVID-19 pandemic or its effects ”. The Commissioner's regulation does not disclose any facts or circumstances to support an extension of 90 days as necessary to respond to the COVID-19 pandemic or its effects. Rather, the Order only states that the extension was "requested by the hearing officer," said 1st Alliance in its new complaint.

In a statement responding to the complaint, Connecticut's banking division said it "continued to work seriously to find a solution," but confirmed that complications related to the COVID-19 outbreak had delayed work.

"Given the size of the documents under review and the unprecedented challenges posed by a global pandemic, the Department has used the authority granted under the Governor's Executive Order 7M to allow an extension to take its decision," it says in the declaration. "This brief extension will ensure that the hearing officer can evaluate the numerous exhibits, documents and testimonials on this case to enable a fair and informed decision on the matter."

The original, unresolved complaint against 1st Alliance addresses the issue of when licensed loan officers need to be involved in raising mortgages through the consumer direct channel. 1st Alliance has deemed the practices general and compliant, but Connecticut regulators called the company's actions outrageous, claiming they used support staff to handle licensable activities in lieu of licensed loan officers.

The dispute between 1st Alliance and its regulator was of more concern to the industry as the evolution of digital mortgage lending has changed the role of loan officers in ways that the original licensing terms may not have foreseen.

So far, other states or regulators have not taken any apparent steps to make similar allegations. Last year, the 1st Alliance principals started a new Massachusetts-based company called Phoenix Home Lending.

1st Alliance continues to pursue a separate legal lawsuit alleging that Connecticut's handling of its licensing status in connection with its unresolved complaint was inadequate and impacted other state licenses that resulted in the company's closure.

A Connecticut Supreme Court judge upheld Connecticut's decision to revoke the 1st Alliance's license in this case, but 1st Alliance has appealed the decision. Connecticut's response on this is pending.

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