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Legal and financial troubles are piling up for mortgage fintech lender LoanSnap, with the company having been recently evicted from its headquarters in Southern California. The news was previously reported this week by TechCrunch.
TechCrunch reported on Monday that while “LoanSnap has not yet shut down, according to two employees, the vibe inside the company is harrowing as workers wait for clarity on the company’s future.“ The firm reportedly failed to pay employees for at least a month late last year, while layoffs and attrition have cut its headcount from more than 100 to less than 50.
Founded by Karl Jacob and Allan Carroll in 2017, the company quickly took off after raising about $100 million in seed funding. Its investors included Virgin Group, led by British business magnate Richard Branson; Liquid 2 Ventures, led by former NFL star Joe Montana; and LinkedIn co-founder Reid Hoffman.
Its “smart loans,” which were built using artificial intelligence technology, are designed to help homebuyers find the best mortgage for their unique financial situation. In May 2022, it launched a cloud-based portal, LoanFlow, that gives mortgage brokers and loan officers the ability to originate loans anytime, anywhere.
But LoanSnap began running into financial trouble in late 2022, TechCrunch reported. It has been the target of lawsuits from at least seven creditors since then, including Wells Fargo, “who collectively alleged the startup owes them more than $2 million.“
The report goes on to note that multiple complaints have been filed against the company with the Better Business Bureau, which has given LoanSnap an “F“ rating.
Some of complaints center around allegations that the firm charged nonrefundable fees but failed to close on loans “in a timely manner“ and did not pay taxes from escrow. Others charge that LoanSnap sold loans that were already paid off, rather than closing the accounts, while also “misleading consumers about mortgage approvals and shorting escrow accounts.“
In January 2024, HousingWire reported that LoanSnap had received a temporary cease-and-desist order from the Connecticut Department of Banking for widespread mortgage origination activity that was unlicensed. The regulator also charged the company with violations of the Truth in Lending Act and Fair Credit Reporting Act.
The complaint alleges that for roughly three months in 2022, LoanSnap used individuals who were not licensed loan officers in Connecticut to solicit potential borrowers, collect mortgage applications and negotiate terms. The unlicensed LOs allegedly purchased leads from sites such as LendingTree to make the initial contact with consumers.
As for the eviction, TechCrunch reported that it stemmed from a lawsuit filed by its landlord in February 2024. The suit stated that LoanSnap owed more than $400,000 in unpaid rent. After failing to respond to the suit, a judge issued a default judgment and the landlord was allowed to move forward in May with eviction proceedings on the office space that the company was leasing in Costa Mesa, California.
The report also noted that another lawsuit was filed last month with the New York State Supreme Court, alleging that LoanSnap owes $900,000 to a creditor.
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