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LoanSnap, a fintech mortgage lender that launched in 2018 promising to help consumers use their home equity to pay off high-interest debt, has had its license revoked in Connecticut and has been put on notice by California regulators that they intend to do the same.
The Costa Mesa, California-based lender — which raised millions in venture capital from funds associated with celebrities like Richard Branson, Joe Montana and LinkedIn co-founder Reid Hoffman — saw most of its business dry up last year.
LoanSnap was evicted from its headquarters in May and also faces lawsuits by creditors, according to Connecticut regulators who issued a cease and desist order against the company in January and suspended the company’s license in the state in July.
LoanSnap, which did not respond to requests for comment from Inman, entered into a consent order with the Connecticut Department of Banking on Oct. 2.
Connecticut regulators alleged that the company employed call center representatives who acted as unlicensed mortgage originators by taking loan applications, offering or negotiating loans, and denying credit to some borrowers.
Although LoanSnap entered into the consent order “without admitting or denying any allegations,” the company also agreed not to make any public statement “denying, directly or indirectly, any allegation” or to “create the impression that [the] consent order is without factual basis.”
Riding the pandemic refi boom
After acquiring an existing mortgage lender, DLJ Financial, and launching in 2018, LoanSnap’s business got off to a slow start. The company originated just 380 loans in 2019 totaling $131.7 million, according to a Consumer Financial Protection Bureau database.
But when mortgage rates plummeted to historic lows during the pandemic, LoanSnap’s business took off. In 2020 and 2021, LoanSnap reported originating 2,164 loans totaling $822 million.
In announcing $10 million in venture funding in May 2020, LoanSnap claimed to have invented “the world’s first smart loan technology that uses artificial intelligence to analyze a person’s finances and shows simple ways to benefit from a smarter loan.”
That round — co-led by True Ventures and MANTIS, the investment firm created by EDM-pop duo The Chainsmokers — followed on the heels of a $30 million Series B, and previous investments by Richard Branson’s Virgin Group and Joe Montana’s Liquid 2 ventures.
LoanSnap attracted high-profile investors
LoanSnap co-founder and CEO Karl Jacob, left, and co-founder and CTO Allan Carroll, right, pose with backer Richard Branson. Source: Screenshot of LoanSnap website.
Offering cash-out refinancing and home equity lines of credit (HELOCs), LoanSnap encouraged consumers to consolidate high-interest rate debt into a loan backed by their home in order to get a lower rate.
“The interest rates on your credit cards, student loans or car loans are likely much higher than the interest rate on your mortgage,” LoanSnap continues to pitch consumers on its website today. “Most people don’t realize they can move their credit cards or loans to their mortgage and save thousands in interest payments. Other lenders only focus on interest rates because it is easier to do, but their customers end up losing money by not getting a full view of their finances.”
But as mortgage rates began climbing in 2022, the refinancing boom enjoyed by the mortgage industry as a whole began to dry up. LoanSnap’s originations that year dwindled to 567 loans totaling $210 million, according to the CFPB database.
Last year, LoanSnap only originated 42 loans totaling $3.59 million — an average balance of $85,476 per loan. The lender turned down 12 applications, and borrowers who submitted 68 applications totaling $10.25 million withdrew them.
Connecticut Department of Banking exam
LoanSnap’s problems with Connecticut regulators — first reported by TechCrunch — date to an examination launched by the Consumer Credit Division of the Connecticut Department of Banking in July 2022.
In their initial cease and desist order filed against the company in January, Connecticut regulators alleged that LoanSnap’s nationwide business model depended on employing salespeople to do work that, legally, can only be performed by licensed mortgage loan originators.
That work included taking loan applications, gathering financial information such as bank statements, W-2s, tax returns and pay stubs, and advising prospective borrowers on their options.
Combing through records, including mortgage loan files and payroll records — and listening to recorded calls with consumers in Connecticut and other states — bank examiners concluded that unlicensed LoanSnap call center representatives made outbound calls to potential borrowers using leads from companies like LendingTree.
The LoanSnap call center reps would then make an initial determination about whether the borrower qualified for a loan product and advise them of their options before sending them to a licensed mortgage loan originator, Connecticut regulators alleged.
“The examination also found that if an unlicensed [salesperson] determined that respondent did not have ‘beneficial options’ for a potential borrower, they would so advise the potential borrower and would end the call without allowing the potential borrower the opportunity to speak with a licensed mortgage loan originator,” regulators alleged.
Instead, examiners said, prospects who supposedly didn’t qualify were advised that a “senior mortgage banker” would “review the file and contact the potential borrower if they determined that there were any ‘beneficial options,’ effectively denying the potential borrower credit.”
LoanSnap dropped demand for hearing
Connecticut regulators said that LoanSnap provided a written response on Aug. 18, 2023, “denying, in large part” the examiner’s findings, which regulators found “unpersuasive.”
In a May 15, 2024, consent order, LoanSnap agreed to pay a $75,000 civil penalty and requested a formal hearing in the hopes of keeping its license.
But LoanSnap dropped its demand for a hearing in Connecticut and agreed to the Oct. 2 consent order.
According to that recent order, the Connecticut Banking Commissioner had automatically suspended LoanSnap’s license on July 11, alleging that the company had moved its main office in California without filing a change of address with Nationwide Multistate Licensing System and Registry (NMLS) within 30 days.
LoanSmart’s landlord, MGR OC1 LLC, had sued the company in Orange County in February, claiming it was owed $537,304 in back rent, and obtained an eviction with sheriff lock-out of the premises on May 16, Connecticut regulators said.
LoanSnap’s license also qualified for automatic suspension because it had failed to provide a bond rider or endorsement to the surety bond on file with the state, the consent order said. On July 24, Connecticut regulators said they received notice from LoanSnap’s surety bond provider, The Cincinnati Insurance Company, that the company’s bond would be canceled on Aug. 24.
Connecticut regulators also alleged that in applying to renew its license in December, LoanSnap falsely stated it had no unsatisfied judgments or liens against it. But on Nov. 7, Wells Fargo had won a $431,511 judgment against LoanSnap in a breach of contract lawsuit over a mortgage that it sold to the bank.
The consent order also detailed legal actions by creditors including Optimal Blue, Mortgage Capital Trading, Anderson Tax LLC and South Street Securities, some of which predated its license renewal request.
LoanSnap “fails to demonstrate that its financial responsibility, character and general fitness are such as to command the confidence of the community and to warrant a determination that LoanSnap will operate honestly, fairly and efficiently,” Connecticut regulators said in summing up their case for revoking the company’s license.
In discussions with Connecticut regulators, “LoanSnap sought to negotiate the surrender of its license to engage as a mortgage lender in Connecticut in lieu of revocation,” the consent order said. “LoanSnap was advised that due to the outstanding nature and extent of the above-referenced allegations, any surrender request would not be accepted.”
California regulators notified LoanSnap on Aug. 19 of their intention to revoke the company’s mortgage lending license in the state, citing the Aug. 4 expiration of its surety bond.
Still open for business?
Calls to LoanSnap Friday weren’t answered, and the company did not respond to emailed requests for comment from Inman. Although the company’s website makes it appear that the company remains open for business, clicking on a button to “Get Started” on applying for one of LoanSnap’s “SMART loans” generates an error.
According to Connecticut regulators, LoanSnap was licensed to do mortgage business in approximately 40 states in Aug. 2023. NMLS records show LoanSnap currently holds licenses in 13 states, including California, and sponsors six mortgage loan originators.
On a website FAQ, LoanSnap says its services are available in 29 states — Alabama, Arkansas, Arizona, California, Colorado, Florida, Georgia, Iowa, Idaho, Illinois, Indiana, Kansas, Louisiana, Maryland, Michigan, Nebraska, New Hampshire, New Jersey, New Mexico, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Washington and Wisconsin.
“If you live outside these states, we are expanding as fast as we can and hope to be available in your state soon!” the website states.
Connecticut regulators had also alleged that “LoanSnap advertised to consumers on its website that it was licensed in states in which it was not.”
In February, LoanSnap announced it had been accepted to Visa’s Fintech Fast Track program, which the credit card giant describes as s “program designed to help fintech and crypto companies bring new payments solutions to market.”
“This unparalleled achievement marks a significant milestone in the mortgage industry, positioning LoanSnap at the forefront of fintech innovation,” LoanSnap said in a press release.
LoanSnap announced in April that it had joined NVIDIA Inception, a program the chipmaker says it created “to help startups evolve faster through cutting-edge technology, opportunities to connect with venture capitalists, and access to the latest technical resources from NVIDIA.”
Visa and NVIDIA did not respond to Inman’s requests for comment on LoanSnap’s continued participation in the programs.
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