East Hartford Mortgage Company Loses Initial Battle in Bank Service Dispute

1st President of the Alliance John DiIorio (Shawn Beals / ctnewsjunkie)

HARTFORD, CT — A state banking department hearing officer has upheld the agency’s decision to revoke the license of East Hartford-based 1st Alliance Lending when a bond expires.

The company and the banking department have been in conflict for the past year over the role of call center staff in the mortgage pre-approval process. During the dispute, 1st Alliance attempted to voluntarily relinquish its Connecticut license to settle the case, company president John DiIorio said during testimony in September.

But the state said the voluntary surrender was only an offer, not a guarantee of acceptance. After the company’s $ 200,000 bond expired on July 31, the agency was required to revoke the loan license by state law. Without a surety in place to potentially protect consumers, lenders are not allowed to operate, the state said.

The October 4 decision confirms the revocation of the August 1 loan license.

The 1st Alliance and the state were told in May that the bond would expire on July 31, and DiIorio said his company was interpreting a state notice, which mentioned voluntary surrender, as an offer to settle. He said the company relied on communications from Banking when it chose not to pay $ 5,000 to reinstate the bond with another insurer and instead tried to relinquish its license to do business. in Connecticut.

The hearing officer, who is an official with the Banking Department, wrote in the Oct. 4 decision that state laws allow the commissioner to consider a request for voluntary surrender, but do not require that an offer is automatically accepted.

When the bond expired, state laws required the banking department to revoke the loan license, the hearing officer wrote.

Attorney Ross Garber, who represents 1st Alliance, said the company will appeal the decision to Superior Court.

“1st Alliance Lending has ceased all mortgage related activities, relinquished all licenses and is on the verge of failure. Connecticut has lost 150 jobs as a result of this DOB action, ”the company said in a statement.

“As for the Connecticut Banking Department’s order to revoke the company’s license, that was expected. This is part of the DOB’s illegal campaign to regulate through a game of “gotcha” and oust a law-abiding business that other states welcome with open arms. We will appeal this decision to the courts, where the law – not a bureaucrat’s view of what the law should be – applies, ”the statement said.

In a separate proceeding, the banking department also began a license revocation process that could result in penalties for the company.

Appeal hearings are unusual because most cases are settled, banking department spokesman Matthew Smith said.

“The facts of this case indicate the only conclusion that can be drawn under Connecticut banking law: 1st Alliance did not fund a bond even though there had been an opportunity to do so, as testified at the hearing John DiIorio himself. This triggered an automatic suspension of their license, ”Smith said in a statement. “At the time of the hearing, accelerated at the request of the 1st Alliance and accepted by the Ministry, no bond was in place, leaving the commissioner with no choice but to revoke their license.

The dispute revolves around the admissions procedures 1st Alliance used to begin mortgage pre-approvals that consumers get during the home buying process. The state says consumers could have been misled by these employees, while 1st Alliance says they played no role in the decision-making process for mortgage pre-approvals and were only used to enter data which would then be taken into account by approved loan officers.

The 1st Alliance has suspended all loan operations while its battle with the state continues. The company had around 170 employees a few years ago, but now has fewer than 20, DiIorio said. He accused the state of deliberately trying to shut down the business with aggressive and unfair tactics.

The state is demanding $ 1.5 million in penalties. Testimonies began in late September and the case is expected to resume later this month.

Garber said 1st Alliance could operate in other states where its license is still active, but chose to suspend all workplace loans to focus on resolving the dispute in Connecticut. The company’s goal continues to be to resume operations elsewhere, he said.

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