A bankrupt lender in Las Vegas sued the state of Nevada on Tuesday after the state ordered it to stop operating as a mortgage broker.
Integrated Financial Associates Inc. filed for Chapter 11 bankruptcy reorganization on March 14 and is now seeking court and creditor approval to emerge from bankruptcy.
IFA’s most recent financial report listed assets of $13.6 million against liabilities of $46 million.
IFA is a hard money lender, meaning it is among companies that pool investors’ funds and loan the money to real estate buyers and developers, earning fees in the process. IFA and similar companies were hurt by the recession, with many of their real estate borrowers defaulting on loans.
On Sept. 28, the state Department of Business and Industry and its Division of Mortgage Lending ordered IFA to stop providing mortgage broker services or holding itself out “as engaging or carrying on the business of a mortgage broker or mortgage agent.”
The state agency noted IFA was insolvent, and it refused to renew IFA’s license. The company had held the license since 1997, but it expired on June 30.
IFA on Tuesday filed a lawsuit-like complaint in U.S. Bankruptcy Court for Nevada asking for an injunction prohibiting the state from failing to renew IFA’s mortgage broker license.
“The debtor asserts that the failure to renew the license is a violation of the automatic stay and is unfair discrimination against the debtor,” the complaint says.
Certain legal actions against a debtor are “automatically stayed” by a bankruptcy.
IFA said in the complaint that while it hasn’t originated loans since April 2009, “the debtor is acting in its capacity as (loan) servicer and is taking appropriate steps to maximize a recovery for all of its investors and creditors.”
“The debtor’s reorganization is dependent upon its ability to continue to operate as loan servicer for the various loans that it manages and to act as manager for certain limited liability companies that the debtor has formed to manage properties that have been foreclosed on,” the complaint says. “If an injunction is not granted, the debtor will be unable to operate its business.”
Officials at the Department of Business and Industry couldn't immediately be reached for comment after hours on Tuesday. Attorneys for the state have not yet responded to the lawsuit.