Official plans hearing on USA Capital settlement
Nevada Mortgage Lending Commissioner Joseph Waltuch will hold a hearing Friday on whether to accept a settlement agreement with the New York company that is servicing loans from failed USA Capital.
Compass Partners, a New York private equity firm, acquired loan servicing rights from USA Capital and ownership interests in some mortgage loans for $67 million through a bankruptcy court auction.
The Nevada Mortgage Lending Division issued a cease and desist order against Compass in May, contending that Compass was operating without a mortgage brokers’ license in Nevada. Compass denied that it violated state law, but it has reached an agreement to settle the dispute by paying $14,000 to the state for expenses related to the investigation.
Meanwhile, Compass has met opposition to its loan servicing operation from the Lenders Protection Group. Patsy Rieger, a member of the group, opposed the settlement agreement. So Waltuch scheduled the 1 p.m. hearing to consider whether he should approve the settlement.
The dispute stems from the April 2006 bankruptcy filing of USA Capital, a private lending company that solicited investor money for loans to developers who provided real estate as collateral. About 6,000 investors from around the country had entrusted $962 million to USA Capital when USA Capital became insolvent and filed for bankruptcy.
Later that year, bankruptcy Judge Linda Riegle agreed to auction the loan servicing rights for USA Capital loans along with ownership interests in some of those loans. Compass Partners submitted the winning bid for $67 million and took over the USA Capital assets in February.
The New York firm learned that Nevada did not grant interim licenses for mortgage brokers. So the company initially subcontracted with USA Capital to service the loans, according to a proposed settlement agreement.
In April, Compass told the mortgage division that it terminated the contract for loan servicing at USA Capital, the document explained. Compass said it withdrew its application for a license and was servicing the loans outside of Nevada.
The mortgage division alleged that Compass represented borrowers in loans on seven occasions, which the division said the actions could be considered unlicensed activity. But the division concluded the actions were “neither willful nor intentional.”
Contact reporter John G. Edwards at jedwards@reviewjournal.com or (702) 383-0420.