LoanSnap, an AI-powered mortgage startup, has had its license to operate in the state revoked, according to the state's banking commissioner. This occurred after LoanSnap violated a consent order it signed with the Ministry of Banking in May.
The department said Tuesday that its Consumer Credit Division began an investigation that found multiple violations of state law following a prior consent order. As a result, the Department and LoanSnap entered into a new consent order on October 2, which resulted in the revocation of LoanSnap's license.
The reversal comes four months after TechCrunch's exclusive report on how LoanSnap was inundated with lawsuits and forced out of its California headquarters while its business collapsed amid sky-high interest rates. I was disappointed.
LoanSnap founders Karl Jacob and Alan Carroll did not immediately respond to emailed requests for comment. The Connecticut Department of Banking referred TechCrunch to the new consent order.
The Department of Banking says LoanSnap violates state law in several ways. First, the company failed to apply for a change of address with the National Multistate Licensing System and Registry, a national licensing system for loan originators. This is a change necessitated by the company's eviction. According to the new consent order, Loansnap also violated Connecticut law by failing to disclose multiple default judgments entered against the company as a result of multiple lawsuits.
The Connecticut Department of Banking also said Loansnap failed to develop new policies and procedures it was supposed to implement as part of the May consent order, including ensuring that unlicensed employees were not making loans. It also states:
Founded in 2017, LoanSnap has raised millions of dollars from investors including Richard Branson's Virgin Group, The Chainsmokers' Mantis Ventures, Baseline Ventures, and Reid Hoffman. The company promises to use AI to simplify the home lending process and originated about 1,300 loans totaling about $500 million in 2021, according to data filed with federal regulators.
But when interest rates rose, LoanSnap's business dried up. LoanSnap originated only 42 loans totaling $3.6 million in 2023, according to data recently released by the Consumer Financial Protection Bureau.