Proposed fine against CM Capital Services disclosed

The Mortgage Lending Division on Thursday disclosed a proposed $200,000 fine against CM Capital Services, formerly known as Consolidated Mortgage, for unspecified violations of state law.

Representatives of Division Commissioner Joseph Waltuch and CM Capital Services have been negotiating an agreement on sanctions against the hard-money lender for months, but Waltuch hasn't yet signed the proposed order. Waltuch said he will schedule a public meeting on the proposed agreement at the request of CM Capital's investors.

CM Capital spokeswoman Carrie Cook said the division's action is "outlined fairly clearly in that particular report" and declined further comment.

Attempts to reach Todd Parriott, manager of the parent company of CM Capital Services, for comment failed. Several times, an automated telephone recording at CM Capital Services said the company was "experiencing high call volume."

Henderson-based CM Capital manages an estimated $400 million in assets for more than 3,000 investors.

Like other hard-money lenders, CM Capital solicits money from individual investors and uses the money to make loans secured by real estate. Investors typically are attracted by interest rates of 10 percent and more, plus the security of having real estate as collateral.

Real estate values in Southern Nevada have collapsed over the last few years and many developers, who typically borrow from hard-money lenders, have defaulted on loans.

While many investors are unhappy that their loans have gone bad, the division's proposed order deals with alleged violations of the law at CM Capital, not with the problem of loans going into default.

The proposed settlement doesn't specify any specific violations but orders the company to follow several guidelines in its operations.

The proposed agreement would:

■ Prohibit CM Capital from making loans that aren't fully funded.

■ Direct CM Capital to obtain written votes of investors owning 51 percent or more of the loans before taking actions involving those loans.

■ Bar the company from releasing money out of construction control accounts except upon the written consent of the borrower.

■ Only allow CM Capital to release money in interest reserve accounts to investors, who own the money, unless the investor grants a waiver.

■ Ban CM Capital from making inaccurate or misleading statements in investment materials and advertisements.

■ Order the company to send investors monthly updates on the status of loans.

The proposed order doesn't deal with an audited report that showed the lender is insolvent and had negative net worth of $4 million at the end of last year.

The agreement would require CM Capital to pay the $200,000 fine plus $10,000 for the costs of investigation and $4,900 for attorney fees when CM Capital signs the agreement.

Contact reporter John G. Edwards at
jedwards@reviewjournal.com or 702-383-0420.