Settlement expected by Henderson-based lender
State regulators are expected to disclose a proposed administrative action today against CM Capital Services, a $400 million hard-money lender formerly known as Consolidated Mortgage.
Carrie Cook, vice president of marketing and sales at the Henderson-based company, confirmed that CM Capital is in talks with the Mortgage Lending Division about consenting to the administrative action. She declined to reveal what alleged legal violations the proposed settlement addresses.
Mortgage Lending Commissioner Joseph Waltuch said the proposed action will be posted on the division's website today but declined to discuss the alleged violations ahead of that disclosure.
CM Capital has tentatively agreed to the negotiated settlement, Waltuch said. Cook said the firm hasn't agreed to the terms of the settlement.
"We have and will continue to do things ethically and do things in the best interest of our investors," Cook said.
Like other hard-money lenders, CM Capital solicits money from individual investors to make short-term loans secured by real estate. Investors are attracted by the opportunity to earn double-digit percentage yields on these loans.
However, hard-money lending in Nevada has slowed to a trickle as developers, who typically borrow from these companies, have been going into default on the loans in large numbers.
CM Capital has between 3,000 and 4,000 investors and about 100 employees, including affiliated companies, Cook said.
While CM Capital has $400 million in investor assets under management, it has obtained financial statements for its own business.
CM Capital had a negative net worth of $4 million at the end of 2009, according to an audit by CM Capital's accounting firm, the Savannah, Ga., office of Hancock & Askew. The audit showed the company had $20 million in assets.
The financial report said that CM Capital lost $941,000 in 2009, up from $596,000 in the prior year.
Cook declined to comment but confirmed that CM Capital contracts with Hancock & Askew for financial audits.
When asked whether he could comment, Waltuch said, "Probably not at this time."
Todd Parriott, a manager of CM Group which controls CM Capital, was said to be unavailable for comment Wednesday.
The Mortgage Lending Division disclosed the proposed settlement in letters to investors who complained about CM Capital.
One of those investors, Dean Alt-
schuler of Del Mar, Calif., provided to the Las Vegas Review-Journal a copy of the letter he received. Altschuler also provided a copy of the audit.
In the letter, chief compliance audit investigator Tony Frascarelli wrote that the division has proposed an agreement that "covers the violation(s) of law that we believe may have occurred in relation to your complaint" at CM Capital.
"It's not required that we send a letter to anyone," Waltuch said, but the division wants to inform these individuals of the outcome of the investigation.
The proposed settlement agreement will be made public for three business days on the division website as provided by state law, Waltuch said. During that time, investors may seek a hearing on the proposed settlement.
Once Waltuch signs an administrative action, that document will be posted indefinitely on the division website, he said.
An affiliated company, Desert Capital REIT, in May reported it may be unable to continue as a going concern.
Desert Capital on July 7 said it reached a forbearance agreement on a $13.7 million loan it received. The agreement requires the loan be paid by June next year.
Contact reporter John G. Edwards at
jedwards@reviewjournal.com or 702-383-0420.
