LoanSnap, an AI-powered mortgage startup, has had its license to operate revoked in Connecticut, according to the state’s Banking Commissioner. This occurred after LoanSnap violated a consent order it had entered into with the Department of Banking in May.
The department revealed Tuesday that its consumer credit division opened an investigation that found multiple violations of state law following that prior consent order. As a result, the Department and LoanSnap entered into a new consent order on October 2 that resulted in revoking LoanSnap’s license.
The revocation comes four months after TechCrunch’s exclusive reporting about how LoanSnap became inundated with lawsuits and was evicted from its California headquarters, all while its business cratered amid sky-high interest rates.
LoanSnap founders Karl Jacob and Allan Carroll did not immediately respond to an emailed request for comment. Connecticut’s Department of Banking referred TechCrunch to the new consent order.
The Department of Banking says LoanSnap violated state law in a few ways. First, the company failed to file a change of address with the Nationwide Multistate Licensing System and Registry, the nationwide licensing system for loan originators — a change that was necessitated by the company’s eviction. LoanSnap also violated Connecticut law by failing to disclose multiple default judgements entered against the company as a result of multiple lawsuits, according to the new consent order.
Connecticut’s Department of Banking also says LoanSnap failed to craft new policies and procedures that it was supposed to implement as part of the May consent order, including making sure that unlicensed employees weren’t originating loans.
LoanSnap raised millions of dollars since its 2017 founding from the likes of Richard Branson’s Virgin Group, the Chainsmokers’ Mantis Ventures, Baseline Ventures, and Reid Hoffman. It promised to use AI to simplify the home lending process, and in 2021, it originated nearly 1,300 loans for a total value of almost $500 million, according to data filed with federal regulators
But as interest rates rose, LoanSnap’s business dried up. Recently-released data from the Consumer Financial Protection Bureau shows LoanSnap only originated 42 loans in 2023 for a combined value of $3.6 million.