Mortgage Lending Commissioner Joseph Waltuch on Monday posted a revised proposed settlement agreement that fines hard-money lender CM Capital Services $200,000 and adds new terms to an earlier proposed settlement.
The original settlement proposal was disclosed in July.
Dean Altschuler, the unofficial leader of investors in loans made by CM Capital, lambasted the revised settlement in an e-mail.
"I'm shocked and very disappointed with the settlement," Altschuler, a certified public accountant from Del Mar, Calif., said. "The violations indicate substantial misconduct. Other brokers have lost their license(s) for less."
Waltuch said he doesn't comment on proposed disciplinary settlements.
Through spokeswoman Carrie Cook, CM Capital CEO Todd Parriott said, "CM Capital Services respects the opinion of the Mortgage Lending Division and has not only rectified all situations but will continue to work with the Mortgage Lending Division so that it can continue to remain in good standing with the agency."
Like other hard-money lenders, CM Capital solicited money from investors for short-term loans to developers. The loans carried double-digit interest rates and were secured by real estate.
Many of the CM Capital loans have been foreclosed, because developers defaulted during the Southern Nevada real estate crash of the last few years.
After foreclosure, CM Capital often put the repossessed assets into limited liability companies.
"After the transfer (of the foreclosed assets), CM placed mortgages against our free and clear property," Altschuler said. "CM then pays itself up to $20,400 per month to manage raw land and empty buildings."
Altschuler said he fears the new mortgages will be foreclosed, wiping out the investors in many cases.
In the majority of cases, however, investors agreed to have the foreclosed property mortgaged to generate money to cover expenses and management fees for the foreclosed property before its sale, Cook said.
Similar issues arose with foreclosed properties at OneCap Mortgage and at other hard-money lenders who found themselves holding foreclosed properties for investors.
The division has proposed rules that would require more disclosure about fees for management of foreclosed assets.
Although the rules haven't been adopted, the revised agreement with CM Capital contains provisions that address CM Capital's management of foreclosed properties through affiliated companies.
The settlement requires that the limited liabilities companies set up by CM Capital offer to resign as manager of foreclosed real estate so investors can designate a separate asset manager.
The revised settlement adds a requirement that CM Capital have an accountant report on its solvency as of Feb. 28.
The document doesn't explicitly outline alleged violations. But it lists a series of prohibited practices and other requirements.
The settlement would:
■ Bar CM Capital from making a loan that isn't fully funded
■ Ban CM Capital from removing money from construction control accounts without the borrowers' written consent.
■ Prohibit CM Capital from creating advertisements that contain inaccurate or misleading information.
■ Require the company to give investors monthly reports on loan transactions.
Cook said CM Capital will pay the fine the same day the settlement is finalized, which could be as soon as this week.
Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.
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