EAST HARTFORD, CT — A national mortgage lending firm announced Thursday that it has suspended its operations and blamed the state banking department for putting it out of business with an unfair investigation into allegations of fraud.
John Dilorio, the CEO of 1st Alliance Lending, spoke with reporters Thursday in the company’s 11th floor office in the Founders Plaza complex overlooking downtown Hartford from across the Connecticut River.
He was flanked by his 17 remaining staff members, down from 42 in July and more than 170 at its peak a few years ago, and pledged to fight the state through a late-September hearing on banking department allegations first published Dec. 5, 2018, then amended in July.
Dilorio accused the state banking department’s staff of misrepresenting the investigation, intimidation, and interfering in the regulatory processes of other states. He said their investigation has been “a series of activities that have done irreparable harm to what was once a very vibrant and good organization.”
The investigation examined the company’s use of intake screeners known as home loan coordinators, who process the first component of home loan pre-approval applications based on leads from real estate websites.
The state said it began the investigation “after it received a whistleblower complaint of unlicensed mortgage origination activity at the company.”
Dilorio said the home loan coordinators have never performed tasks that could be viewed as an offer of a home loan or a negotiation of a rate, and that their role has never had any influence over a mortgage loan originator’s decision-making process.
“What I want to make sure this experience doesn’t become is some sort of rage against government, some rage against the state,” Dilorio said. “We are talking about a handful of people that in my view have clearly acted in bad faith, and that behavior cannot be tolerated.”
The company had been operating in 46 states with employees in East Hartford and in Houston. The remaining staff are working on a recovery plan in the event a late-September hearing on the investigation clears the way for 1st Alliance to resume operations.
State Department of Banking spokesman Matt Smith said Thursday that 1st Alliance’s license was suspended automatically when The Hartford canceled a $200,000 bond required for the company to lend in Connecticut. The license suspension wasn’t directly related to the investigation, and if that bond were reinstated with another insurance company, 1st Alliance could resume its operations, Smith said.
“As a regulator, the Connecticut Department of Banking has the dual task of ensuring a healthy financial services sector while protecting the hardworking families of Connecticut,” Smith said in a statement. “The Department will continue to work toward a fair resolution of the allegations against 1st Alliance but must ensure that companies doing business in Connecticut play by the same rules.”
The state offered a settlement of the case more than a year ago, but Dilorio said that would have required the company to essentially admit guilt and pay a fine. He also said the agreement amounted to a “gag order,” and that 1st Alliance offered instead to pay for the costs associated with the state’s investigation.
The state said the settlement offer included a fine but explicitly did not require the company to admit guilt. There was no gag order, only a requirement that the company “refrain from denying the allegations or making public statements creating any misimpression that the allegations were without factual basis.”
Dilorio said 1st Alliance will be prepared to continue operations later this year if the hearing results in a favorable outcome for the company, but said he was speaking publicly about the investigation because of the “human cost” on the company’s staff, which he said shrank by about 160 in 14 months.
“My industry needs regulation, this company was built fixing the problems that are directly tied to lack of regulation,” Dilorio said. “There’s a big difference between sound regulation and rogue bureaucrats that are uncontrolled by their superiors.”