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Ameriquest Settles Massive Mortgage Fraud Claim
They’ve been lending mortgages to hundreds of thousands of American homebuyers with bad credit for years—that is, until the lawsuits claiming predatory lending practices started to pile up. Yesterday, Ameriquest Mortgage, one of the largest lenders in the country, settled multi-million dollar lawsuits alleging mortgage fraud spanning 49 U.S. states.
From today’s online edition of the The San Francisco Chronicle:
Ameriquest Mortgage, the nation’s largest subprime mortgage company, settled predatory lending allegations by 49 states on Monday, agreeing to pay $295 million in restitution and clean up its lending practices. The agreement, which included an additional $30 million to reimburse states for their legal fees, was the second-largest predatory lending settlement, after a $484 million agreement reached in 2002 with Household Finance Corp.
In a conference call, several state attorneys general said Monday they found evidence that Ameriquest had engaged in a wide variety of unethical and possibly illegal sales tactics. Before 2003, they found many instances where Ameriquest customers ended up with more expensive loans than sales reps had promised. Those abuses abated after Ameriquest changed some sales practices in 2003, but others persisted, and in some cases, worsened, regulators said. Some Ameriquest sales reps allegedly inflated borrowers’ incomes so they could take out a bigger loan, often one they couldn’t afford to repay.
At issue was whether Ameriquest turned the American dream of homeownership into a full-on nightmare by using deceitful and deceptive practices to bilk borrowers desperate for better deals on debt. Yesterday’s settlement is a strong indication that Ameriquest–the nation’s leading sub-prime lender–indeed misled consumers as to key terms like interest rates and prepayment penalties, and inflated their incomes levels and home appraisals, all of which lead to higher loans than they could afford and often caused foreclosures and an onslaught of related financial disasters.
At the end of the day, the settlement is as strong an indication as any that Ameriquest pressured appraisers to inflate property values so borrowers could get bigger loans, imposed upfront fees without reducing interest rates as promised, and told borrowers to ignore written information about interest rates because they would give them lower rates later. The company is also alleged to have given them higher interest rates instead. Ameriquest also assured some borrowers that their loans would have no prepayment penalties, then inserted such payments into the final loan documents; delayed the time period between the loan closing and the funding; and misrepresented fees and costs.
Under the terms of the agreement, Ameriquest will pay $295 million in restitution to consumers nationwide and another $30 million to the 49 states and the District of Columbia for attorneys’ fees, costs, consumer education and enforcement programs.
The settlement includes Ameriquest’s holding company, ACC Capital Holding Corporation, and its subsidiaries, Ameriquest Mortgage Company, Town & Country Credit Corporation and AMC Mortgage Services, Inc., formally known as Bedford Home Loan. Ameriquest itself is based in Orange, Cal., near Los Angeles.
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