OneCap will challenge order to cease and desist
OneCap Mortgage, a $400 million-asset private lender in Las Vegas, will challenge the state’s cease-and-desist order, attorney Harold Gewerter said Wednesday.
Nevada Mortgage Lending Commissioner Joseph Waltuch served the Las Vegas-based private lender with a cease-and-desist order on Tuesday, alleging numerous violations of state law. The order raises legal issues involving seven loans and it also questions practices at OneCap generally.
Representatives of One Cap could not be reached for comment late Tuesday, but Gewerter on Wednesday said the company will ask for a hearing so it can contest the allegations.
OneCap “wants to continue in business and keep its good name,” Gewerter said. “One Cap wants to take all legal steps necessary to be cleared and protect its name. Its goal is to protect its investors.”
Private lenders like OneCap solicit money from individual investors and use the money to make short-term loans to developers. Investors often get double-digit interest rates on the loans and usually benefit from having real estate as collateral.
OneCap, which has offices at 5440 W. Sahara Ave., will continue to solicit investments in real estate loans, the attorney said.
The private lender, however, must disclose the pending cease-and-desist order in documents shown to investors. Gewerter acknowledged that the disclosure requirement “does hamper your business.”
The private lender is solvent and could pay a $250,000 fine imposed by Waltuch, Gewerter said, but the company intends to appeal the fine.
In a related move, the Nevada Financial Institutions Division followed the action by the mortgage commissioner with a second cease-and-desist order late Wednesday, seeking another $130,000 in fines from several OneCap entities.
Gewerter earlier said he didn’t know how many loans OneCap is servicing or the number of loans that are past due. OneCap handles loan investments for 2,000 investors. Most of the collateral is located in Nevada but some consists of real estate in Arizona and California.
The private lending sector, Gewerter said, is struggling because of market conditions. The credit crunch in residential lending has stalled developers who get loans from private lenders, Gewerter said.
The lawyer said that “people are looking for scapegoats” because of the housing industry’s woes.
Bob Day, a retired OneCap investor living in Henderson, called the state’s order against OneCap “a good start.” Day, who has complained to state officials about OneCap, expects the state’s investigation of the private lender to continue.
Other investors are afraid to press for more sanctions against OneCap for fear the company will file for bankruptcy court protection, Day said.
The mortgage division’s cease-and-desist order questions the legality of OneCap’s practices. The private lender created limited liability companies that sold interests in loans that weren’t secured by real estate.
The order says that OneCap isn’t licensed to make loans unless the loans have real estate as collateral.
OneCap has stopped that practice, Gewerter said, but the company’s lawyer claimed that OneCap may legally sell interests in these kinds of loans occasionally.
“We believe that there are numerous inaccuracies based on the findings,” Gewerter said.
Waltuch declined comment.
Gewerter said the order incorrectly said OneCap isn’t a publicly owned company. OneCap was a public company until its president and owner, Vincent Hesser, took it private a two years ago, Gewerter said.
It appears, however, that the public company was OneCap and wasn’t OneCap Mortgage, which was licensed as a mortgage broker and private lender.
The state’s cease-and-desist order said that Hesser operated several companies identified as OneCap and also said the companies often were identified interchangeably as OneCap in documents without specifying a particular company.
Assemblyman Joe Hogan, D-Las Vegas, said he was pleased that Waltuch was quick to take action against OneCap.
Hogan intends to introduce a bill next year that will enable investors to obtain more information about private lenders so they can make an informed decision about whether to invest in loans originated by a private lender.
Contact reporter John G. Edwards at jedwards@reviewjournal.com or (702) 383-0420.
