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Michael Strauss, Smart Rate appeal license suspension in Illinois 

Licenses remain active during the hearing process, according to a state regulator

Mortgage executive Michael Strauss and his company, Smart Rate Mortgage, have appealed a decision from an Illinois regulator to suspend their licenses to operate in the state. Meanwhile, the licenses remain active. 

Strauss is returning to the industry after being accused of abruptly shutting down lender Sprout Mortgage in July 2022 without paying former employees’ salaries and severance packages. Strauss is also accused of suspending staffers’ health insurance coverage retroactively to May 2022, despite collecting the employees’ contributions from their paychecks. 

HousingWire reported in January that Strauss was ready to start a new mortgage company after he registered Smart Rate in Florida. The company received a residential mortgage broker license in Illinois on November 1, 2022. Strauss’ MLO license in the state was issued on December 28.

However, the Division of Banking at the Department of Financial and Professional Regulation in Illinois issued orders on February 1 to suspend the licenses, alleging Strauss and Smart Rate did not provide all the requested information. The Department asked about Strauss’ background, including previous companies and lawsuits, and requested information on the Smart Rate owner’s experience with real estate finance. 

“In February, Mr. Strauss and Smart Rate Mortgage filed petitions for administrative hearings to overturn the Department’s suspension orders against them. Both orders are under appeal,” a spokesperson for the Department wrote to HousingWire

According to the spokesperson, the requests for administrative hearings allow the licenses to remain active during the hearing process.

“Administrative proceedings vary in duration and a final decision will be rendered after the proceedings are complete,” the spokesperson added. 

HousingWire sent requests for comment via email to Smart Rate and Strauss but did not receive a response.

The Nationwide Multistate Licensing System shows that Strauss and Smart Rate have been authorized to operate since February 14, but it’s unclear whether Strauss and Smart Rate are already originating home loans.

Mortgage tech platform Modex states that as of March 31, there is not enough data to produce performance metrics for the company. Strauss is the only MLO connected to the company.  

Smart Rate is registered in Florida to Michael’s wife, Beth Strauss, according to the Florida Limited Liability Company. The address listed is 610 Park Avenue, New York, a residential property that Strauss is trying to sell for $24.8 million, down from $26.5 million the owner was asking for in February, according to Zillow

Strauss founded Sprout six years after paying $2.45 million to settle a case with the Securities and Exchange Commission (SEC) over accounting fraud. According to the SEC, the executive caused losses to investors after engaging in a pattern of false and misleading claims at American Home Mortgage Investment Corp.

At Sprout, Strauss struggled to sell loans in the secondary market that were originated at 2-4% when investors were asking for more premiums. It forced the executive to shut down the company.

Ultimately, he laid off employees in July 2022, and since then, he has been the target of several lawsuits from former employees, vendors and business partners.

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