In an agreement with Connecticut authorities, Ameriquest Mortgage Co. and four of its affiliates will pay over $7 million to settle allegations that it charged excessive fees on refinance loans and employed unlicensed loan officers. Much of that amount, however, will go toward funding housing for the poor.
The settlement agreement announced Thursday came after the Connecticut Department of Banking accused the subprime lender of violating state laws by imposing prepaid finance charges that exceeded the greater of 5% of the principal original loan amount or $2000 to 295 consumers who refinanced their loans within two years of initial origination.
The Orange, Calif.-based lender was also accused of employing or retaining at least 200 unregistered loan originators, according to the settlement agreement document.
Ameriquest agreed to pay a $1 million civil penalty, $6 million to support the creation of the Connecticut Housing Assistance Fund over the next four years, and $250,000 in reimbursement for departmental costs, the Connecticut authorities said.
"We were able to take a negative situation, this company's violations, and make it into a positive one," department commissioner John Burke said in the announcement. "The Connecticut Housing Assistance Fund will concentrate on our cities and help some of our most needy citizens purchase homes."
The affiliates involved were Town & Country Credit Corp., AMC Mortgage Services Inc., Argent Mortgage Co. and Argent Funding Corp., which is formerly known as Olympus Mortgage Co.
Ameriquest worked cooperatively with the department to resolve matters, according to Adam Bass, senior executive vice president of Ameriquest parent ACC Capital Holdings.
"We are pleased to have reached a fair resolution and will continue to serve our customers in Connecticut and to help residents of the state achieve their homeownership dreams and meet their financial goals," said Bass in a written statement.
Under the agreement, Ameriquest is required to hire an independent, third-party auditor, who must be approved by the department commissioner. The auditor is to conduct at least four semiannual reviews of compliance with state laws relating to charges on internal refinances within two years and registration of loan officers.
The settlement marks the second time since last year that Ameriquest has entered settled with the department over allegations of excessive prepayment fees. In January 2004, Ameriquest, Town Country and Argent settled suspected violations occurring prior to August 2003.
Under the latest agreement, if Ameriquest violates statutes related to prepaid finance charges in the future it is required to refund any excess charge, with interest, to the borrower, notify the department of such refund, and pay an administrative fine of $1,000 per loan to authorities. If under 25 violations are discovered by the department auditor, the fee per loan will increase to $5,000, which will jump to $10,000 in the event of more than 25 violations.
Last month, Ameriquest agreed to pay up to $50 million to borrowers in four states to settle a class action lawsuit alleging it inflated fees and failed to deliver on promised interest rates, among other things.
Just prior to that, the mortgage company announced a new chief executive after Wayne Lee, who had been with the company for 15 years, resigned. The executive change ensued a series of published articles accusing the subprime lender of running a boiler room operation that encourages employees to commit fraud.