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Special Reports
Branch Development
CA, Nine Others Act Against Apex
Cited for using unlicensed entities.
By Jennifer Harmon
The California Department of Corporations has joined with bank regulators in nine
other states in taking action against Apex Financial Group, which does business in California under the name Apex
Discount Mortgage.
Commissioner Preston DuFauchard has issued a desist and refrain order against Apex from doing any net branching,
splitting fees with unlicensed entities and for failing to file appropriate disclosures.
Mr. DuFauchard said that California would join with New Hampshire, Connecticut and New Jersey in taking immediate
action to halt Apex's alleged practice of illegally doing business with multiple unlicensed entities, leaving consumers
unprotected by the regulation of the department.
In addition, there are six other states have taken similar steps against this company.
Several additional states are at a still confidential preliminary stage of determining whether action is appropriate.
Such regulatory cooperation increases the speed and efficiency of the states' ability to address illegal mortgage
practices and to protect aggressively each state's consumers.
The Department of Corporations says close cooperation among the states also makes it more difficult for an entity
operating illegally in one state to simply transfer its operations to a new state when the entity comes under regulatory
scrutiny. "This action against Apex shows that we are serious in California about going after lenders who
try and avoid regulation and accountability to consumers," said Mr. DuFauchard. "It also serves as notice
to other lenders that such activity will not be tolerated."
The actions taken against Apex stem from an increasingly common business model in the mortgage broker industry
called "net branching."
Telephone messages and e-mails left for Apex Financial Group were not returned by press time.
While net branching is not per se illegal in all states, where the model often runs afoul of state laws is when
a licensed entity does business with multiple unlicensed entities that broker loans for the licensee. Some states,
like New York, consider it to be illegal
California law contemplates that such entities would either hold licenses in their own names or be licensed as
branches, thus subject to state regulation.
In California, loan originators are either licensed individually and subject to state regulatory oversight, or
are required to be employees closely supervised by the licensee for which they work.
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