Ameriquest Accused of Unfair Practices

February 8, 2005
Andrew Galvin and Jeff Collins

Ameriquest Mortgage Co. faces allegations that it misled and overcharged borrowers, falsified loan applications and saddled low-income and minority homeowners with loans they couldn't afford, public records show.

Ameriquest, based in Orange, is one of the nation's largest lenders to borrowers who have tarnished credit histories or other difficulties getting loans.

Among the legal actions pending against Ameriquest:

Connecticut banking regulators moved last month to yank lending licenses from Ameriquest and an affiliate, accusing the company of repeatedly overcharging its customers, state documents show.

Class-action status was sought in a suit filed last month in federal court in San Francisco on behalf of all Ameriquest borrowers. It alleges the company's loan officers have demonstrated a pattern of unfair and illegal practices.

Ameriquest declined to comment on the Connecticut regulatory action or the California lawsuit, citing a company policy of not commenting on pending legal matters.

The allegations against the company were first reported Friday by the Los Angeles Times.

"We are a nationwide lender and ourvgoal is to continue to lead the industry through best practices and providing superior products and services," Ameriquest said in a statement. "We hold ourselves to the highest standards and ethical practices, and do not tolerate unethical or improper behavior by our employees or our vendors."

Ameriquest is a so-called subprime lender that makes loans to people who have credit problems, heavy debt burdens, or are self-employed. Subprime loans carry higher interest rates and fees than traditional bank loans.

The subprime mortgage industry has been growing rapidly since the mid-1990s.

The Federal Reserve reported that subprime loans grew 25 percent annually from 1994 to 2003. In comparison, overall loan originations rose 17.6 percent. As of 2003, subprime loans made up 8.8 percent of all loans.

Orange County is a hub of subprime lending, with four of the top five lenders headquartered here, according to a Mortgage Bankers Association report from October.

The report said New Century Mortgage Corp. of Irvine is the nation's largest subprime lender, originating more than $23.9 billion of single-family mortgages in 2003. Ameriquest ranked third, at $18.9 billion.

Ameriquest has aggressively sought a high profile. It has plastered its name on everything from blimps to a Texas baseball stadium to the Super Bowl half-time show. And company officials are major political donors.

Ameriquest also marketed itself as a leader in rooting out so-called "predatory lending" practices, which include packing loans with excessive fees and commissions. In 1999, Ameriquest was one of the first subprime lenders to adopt specific lending guidelines designed to eliminate bad practices.

However, Ameriquest has been the subject of far more complaints to the California Department of Corporations than New Century in recent years.

From 2000 to 2004, consumers filed 134 lending complaints against Ameriquest compared to 39 for New Century, said department spokeswoman Susie Wong.

Wong declined to say whether the department is investigating the complaints against Ameriquest.

In Connecticut, a hearing is scheduled for March 31 on the Connecticut Department of Banking's proposal that 24 lending licenses held by Ameriquest and a subsidiary not be renewed.

Ameriquest has been accused of charging excessive refinance fees by 179 Connecticut customers in the past three years -- 39 of them after the firm settled with the state over similar allegations by agreeing to pay nearly $670,000 in refunds and penalties.

Losing the licenses could mean that Ameriquest would stop offering loans in Connecticut. The company also faces as much as $5.5 million in additional penalties.

In the San Francisco civil suit, Ameriquest is charged with failing Ito make required disclosures to borrowers, falsifying Iborrowers' income amounts on loan applications and saddling borrowers with bigger payments than they can afford.

For example, the suit contends that an Ameriquest employee inflated the income on a loan applicationE of Nona Knox, an African-American homeowner in East Palo Alto. The extra income was attributed to a "music academy" purportedly owned by Knox's late husband, although no such academy existed and Knox's husband was not a music teacher.

Allegations of misdeeds are a blow for a company whose executives have been prominent donors to campaigns for state and national political posts.

Ameriquest's co-chairpersons, Dawn and Roland Arnall, each raised at least $200,000 for President George W. Bush's re-election campaign. Arnall family members and 155 Ameriquest employees together contributed $242,500.

Ameriquest and three of its subsidiaries contributed $1 million to Bush's inaugural last month.

The company also contributed $100,000 to oppose the 2003 recall of California Gov. Gray Davis before giving $157,400 to the campaign of the man who replaced him, Gov. Arnold Schwarzenegger.

Source: (c)The Orange County Register