The Connecticut Department of Banking has ruled against 1st Alliance Lending following an investigation that began in 2018 into the mortgage lender’s business practices.

Banking Commissioner Jorge Perez and revoked 1st Alliance’s license to act as a mortgage lender, concluding that the lender, which operated in East Hartford before shutting down in 2019, violated state laws. The commissioner also assessed a $750,000 civil penalty on the company.

The case stemmed from allegations that the lender relied on a call center staff of about 50 unlicensed mortgage loan originators to decide whether potential borrowers were qualified for a 1st Alliance loan product before sending the application to one of the company’s licensed mortgage loan originators to issue a prequalification letter.

In a 52-page report on the findings, the Department of Banking said that 1st Alliance failed “to establish, enforce and maintain policies and procedures reasonably designed to achieve compliance with regulatory requirements.” The investigation also said that the lender violated state law by not telling prospective borrowers that call center employees were not licensed mortgage loan originators. The findings also said 1st Alliance aided and abetted the unlicensed activities of call center personnel.

“By doing nothing to dispel the notion that its call center representatives were licensed, [1st Alliance] violated Section 36a-53b(3) of the Connecticut General Statutes by engaging in an act, practice or course of business that operated or would operate as a fraud or deceit on the borrowing public,” the report said.

The lender’s license had previously been revoked in a separate enforcement action because it had lost its surety bond.

Earlier this year, the Consumer Financial Protection Bureau filed a federal lawsuit against 1st Alliance, alleging unlawful mortgage practices. In response to that lawsuit, 1st Alliance acknowledged in a statement to The Commercial Record that its practices were unusual but insisted they were legal.

“1st Alliance Lending served the underserved in cooperation with HUD.  Our systems of origination were built to accommodate those programs,” the company said in January. “Atypical, yes. Illegal? Not according to the Multi-State Mortgage Committee, or the dozen or so individual states that examined our practices across the country, finding them compliant.”

The Commercial Record has reached out to 1st Alliance’s CEO John DiIorio for comment on the commissioner’s findings.