Fintech
Fintech lender LoanSnap has been evicted and is facing financial and legal turmoil
Legal and financial problems are piling up for the fintech mortgage lender LoanSnapwith the company recently being evicted from its headquarters in the South California. The news was already reported this week by TechCrunch.
TechCrunch reported Monday that while “LoanSnap has not yet closed its doors, according to two employees, the atmosphere inside the company is heartbreaking as workers wait for clarity on the company’s future.” The company reportedly failed to pay employees at least a month late. last year, while layoffs and attrition reduced the number of its employees from more than 100 to fewer than 50.
Founded by Karl Jacob and Allan Carroll in 2017, the company quickly took off after raising around $100 million in seed funding. Its investors were included Virgo Groupled by British tycoon Richard Branson; Liquid 2 businesses, led by former NFL star Joe Montana; AND LinkedIn co-founder Reid Hoffman.
His “smart loans“, which were built using artificial intelligence technology, are designed to help home buyers find the best mortgage for their unique financial situation. In May 2022 it launched a cloud-based portal, Loan flowwhich gives mortgage brokers and loan officers the ability to make loans anytime, anywhere.
But LoanSnap began having financial problems in late 2022, TechCrunch reported. It has since been subject to legal action by at least seven creditors, including Wells Fargo“who collectively said the startup owes them more than $2 million.”
The report goes on to note that numerous complaints have been filed against the company Better Business Bureauwhich gave LoanSnap a Rated “F”.
Some of the complaints center on allegations that the company charged nonrefundable fees but failed to close loans “in a timely manner” and failed to pay fees from escrow. Others accuse LoanSnap of selling loans that had already been paid off, instead of closing accounts, and of “deceiving consumers about mortgage approvals and shorting escrow accounts.”
In January 2024, HousingWire reported that LoanSnap had received a provision of temporary cessation and desistence from the Connecticut Banking Department for the widespread activity of granting mortgage loans without a license. The regulator also accused the company of violations of the Truth in Lending Act and the Fair Credit Reporting Act.
The complaint alleges that for approximately three months in 2022, LoanSnap used individuals who were not licensed loan officers in Connecticut to solicit prospective borrowers, collect mortgage applications and negotiate terms. Unlicensed LOs would purchase leads from sites like LendingTree to establish first contact with consumers.
As for the eviction, TechCrunch reported that it stemmed from a lawsuit filed by its landlord in February 2024. The lawsuit claimed that LoanSnap owed more than $400,000 in unpaid rent. After failing to respond to the lawsuit, a judge issued a default judgment and the owner was allowed to move forward in May eviction proceedings about office space the company was leasing in Costa Mesa, California.
The report also noted this another cause was filed last month with the New York State Supreme Courtclaiming that LoanSnap owes $900,000 to a creditor.