1st Alliance confirms closure as Connecticut mortgage dispute drags on

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Embattled 1st Alliance Lending is officially closing, but its CEO still plans to fight Connecticut's allegations that it used unlicensed personnel to take mortgage loan applications.

"The company is dead. We have surrendered all of our state licenses. We continue to exist so we maintain access to all legal remedies," CEO John DiIorio said in an interview.

The company may consider reopening next year. If it does, its principals may choose to move its headquarters to another state, according to a company press release.

Prior to its dispute with the Connecticut Department of Banking, 1st Alliance employed 178 people and operated in 46 states, according to the company. By August, 1st Alliance had ceased funding and employed just 17 people. It now plans to lay off its remaining five employees by Dec. 15.

The dispute between 1st Alliance and the regulator in its home state was sparked by a whistleblower complaint that led to the allegations that the company was not compliant with nonbank licensing requirements for individuals employed to originate loans.

Connecticut's strict interpretation of licensable activity is inconsistent with other states and destroyed efficiencies the company's call-center business model depended on, according to DiIorio. State DOB officials disagreed, describing the company's alleged breaches of mortgage licensing rules as egregious.

DiIorio is also disputing the way the state handled the surrender of its Connecticut license when it ceased funding earlier this year due to negative implications he said it has for a principal or control person's record.

The company ceased funding after losing its Connecticut surety bond in a move DiIorio said was related to its regulatory dispute with the state. The company tried to surrender its Connecticut license but the state rejected that move and revoked it instead because of the open regulatory dispute, according to DiIorio.

The risk of a compliance action related to loan-officer licensing rules is one that the 17,572 nondepositories listed on the National Multistate Licensing System should be aware of.

But no other state has taken apparent action against 1st Alliance based on the company's LO licensing practices or handled the surrender of licenses in the same manner Connecticut has, DiIorio said. The company has filed Freedom of Information Act requests about the ways the state has handled its allegations against the company and communicated with others. DiIorio rejected an early attempt at a consent order for "constitutional reasons," he said.

The company will have to default on a nearly $1.57 million loan from the Connecticut Department of Economic and Community Development due to financial woes stemming from the regulatory dispute, according to DiIorio. That 10-year loan originally was granted to enable the company to expand into a new headquarters, a project DiIorio said the company was forced to abandon by its costly attempts to address the regulatory complaint.

DiIorio said meetings are being held in regard to the loan, which is collateralized largely by the property the company had at one time planned to move into.

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State regulators Layoffs Nonbank Consumer direct 1st Alliance Lending Connecticut