Shawn Beals/ ctnewsjunkie

HARTFORD, CT—The CEO of an East Hartford-based mortgage firm said his company could have spent $5,000 to keep its license active, but was relying on a letter from the state when it attempted a different way to resolve its dispute with Department of Banking regulators.

The state and 1st Alliance are engaged in a dispute over the company’s use of screeners to begin mortgage originations. The state claims the employees were potentially performing duties that require licensing, but 1st Alliance said they were filling only a basic intake role and had no influence on loan originations.

At a hearing Tuesday morning on a separate issue involving the 1st Alliance lending license, company CEO John Di Iorio said thought a June notice from the state meant that it was voluntarily offering his company a chance to surrender its lending license and stop operating in Connecticut.

State officials testified Tuesday that there was never a guarantee the surrender would be accepted, so the automatic suspension July 31 upon its bond expiration should not have been a surprise to the company.

The June notice from the state referenced a statute number outlining the surrender protocol. It says a voluntary surrender must be approved by the banking commissioner.

That nuance was not included in the state’s letter, but is present in the statute it references. Whether 1st Alliance should have been aware of the possibility for its surrender to be rejected was the most prominent part of the testimony and arguments during Tuesday’s hearing.

Di Iorio said his company had an offer to reinstate its $200,000 bond with a new insurer for just $5,000 in the first year, but tried to instead voluntarily surrender its license in Connecticut while it was attempting to resolve the state’s allegations against the company.

“If Connecticut had made anything clear to us in the last year and a half, it’s that they don’t want us to lend in this state,” Di Iorio said. “This seemed like a really legitimate way for this particular question to be off the table and put an end to it.”

Hearing officer Cynthia Antanaitis, assistant director of the Department of Banking’s Securities and Business Investments Division, gave attorneys for both sides two weeks to submit case briefs before she makes a decision on allowing the state to revoke the company’s lending license.

There is also a hearing scheduled Sept. 24 on the state’s larger allegations against the company.

Di Iorio has previously characterized the state’s investigation as a vindictive and overly aggressive attempt to put the 1st Alliance out of business.

“The harm claimed by Mr. Di Iorio for 1st Alliance failing to maintain that bond in Connecticut … could have been avoided if 1st Alliance simply retained that replacement bond,” said Stacey Serrano, an attorney for the state banking department. “The statutory scheme is clear that a mortgage lender license shall be automatically suspended on the date a bond is canceled. The department is simply following the letter of the law. 1st Alliance still had its license but it failed to have a bond in place as required [by state law].”

“1st Alliance read the plain language of the letter,” Attorney Ross Garber, who represents the lender, said. “1st Alliance did what the letter instructed it could do to avoid suspension. It surrendered its license and it ceased doing business [in Connecticut].”

Garber said the company — if it voluntarily surrenders its license — can continue operating elsewhere, but an action against it by the state effectively shuts down the company in its entirety.

“Under any outcome, it’s not offering mortgages to Connecticut consumers,” Garber said. “Suspension doesn’t protect Connecticut consumers. Revocation doesn’t protect Connecticut consumers. What those actions would do is impair and perhaps irreparably harm 1st Alliance’s ability to serve consumers in other states.”