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Boom to Bust in Under a Year

Dana Capital faced regulation problems before collapse

October 12, 2007

By PATRICK CROWLEY


photo of Patrick Crowley

A California-based mortgage company, which last year touted over $5 billion in annual production, collapsed less than a year later. Before its demise, the company had faced actions by regulators in several states.

Just over a year ago, Dana Capital Corp. was heralding its growth in a self-congratulating press release.

"A key driver of our growth and the foundation of our business model has been the expansion of our network of employees," company founder and chairman Dana Smith said in the statement. "By growing the network we are able to overcome the variables of the often cyclical nature of the mortgage business."

Dana couldn't, however, overcome the latest mortgage cycle, one where lenders are dropping like the proverbial fly.

Earlier this year, the company shut down with virtually no explanation and none of the fanfare used to tout its growth.

"It has come to the attention of the department that Dana Capital Corp. Inc. closed its doors and ceased operations," according to an announcement from the New Jersey Department of Banking and Insurance posted on its Web site in May.

The department also said it had ordered Dana to "stop doing business in the state through unlicensed branch offices and unregistered mortgage solicitors."

The state also alleged the company was not disclosing fees, some as high as nearly $1,000, to borrowers.

The Georgia Department of Banking and Finance also revoked the license against Dana Capital Group, which according to a statement, employed a felon, operated an unapproved branch, failed to maintain proper records and did business with unlicensed brokers.

In 2004, the company was fined $10,000 and received a cease and desist order from the Nevada Mortgage Lending Division when it mailed a direct marketing piece to the home of the regulatory agency's commissioner from California -- in direct violation of the state's laws and after it had already been warned not to do so by the commissioner.

A program officer with the Nevada Mortgage Lending Division told MortgageDaily.com at the time that a Las Vegas location and its broker were still in good standing with the state. "This action is no reflection of (Dana's) local operations," she said.

A visit to Dana's Irvine, Calif., headquarters in May by MortgageDaily.com yielded confirmation of empty offices.

It is not clear if the problems with regulators -- which are also on record in Pennsylvania, Nevada and Connecticut -- or market conditions that have brought down other lenders led to the company's demise.

Dana also did business as Loantiger.com, according to New Jersey regulators.

Loantiger.com and Dana's Web site are no longer operating.

In a June 2006 press release, Dana boasted about having operations in 47 states, a big increase in year-to-date originations and $5 billion in 2005 production. Published reports put employment at more than 1,000.


Patrick Crowley is a feature journalist and blogger for MortgageDaily.com. He is also a reporter, blogger and columnist for The Cincinnati Enquirer.
e-mail Patrick at: [email protected]

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