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News Release

New Jersey Department of
Banking and Insurance

Commissioner Steven M. Goldman

For Immediate Release:
April 20, 2007

For Further Information:
Jim Gardner (609) 292-5064

NJDOBI issues cease and desist orders against two more sub-prime lenders

TRENTON – New Jersey Banking and Insurance Commissioner Steven M. Goldman has signed legal orders today prohibiting two more sub-prime lenders from doing business in the Garden State.

The documents name LoanCity, Inc., based in San Jose, Calif., and Southstar Funding, LLC., of Atlanta, Ga. The cease and desist orders and orders to show cause demand that the companies immediately stop taking loan applications, stop closing loans that they are unable to fund, and present evidence as to why the New Jersey licenses of the entities should not be revoked.

DOBI learned that both companies have lost financial backing and are unable to fulfill existing loan obligations already in process, thus necessitating need for legal action. The department is still in the process of determining how many loan applicants have been affected.

“There is evidence that New Jersey consumers have entered into loan agreements with these entities when, in fact, they have no funding to back these agreements,” Goldman said. “To protect the interests of these consumers and to prevent others from falling into similar situations, it is necessary to take quick and immediate action via the legal system.”

Filing of these actions against LoanCity and Southstar follow identical actions taken against two other companies last month: New Century Mortgage Corp. and Home123, affiliates based in Irvine, Calif. In light of these recent disruptions in the lending market, Goldman said the department is currently working with the legislature and industry trade groups to determine if a more extensive licensing procedure is warranted for certain aspects of the mortgage lending industry.

Goldman advises any consumers who have recently closed loans with these companies to immediately contact their settlement agent (i.e., lawyer or title company) to make sure monies have been received. Consumers who have recently submitted an application or have an application pending are advised to contact their mortgage broker to ask for another lender.

Additional information will be posted on the DOBI Web site as it becomes available. Individuals with questions regarding a loan pending with any of these companies may call the DOBI Consumer Hotline at 609-292-7272.


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