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Ameriquest Finalizes Settlement

$325 million settlement announced

January 24, 2006

By COCO SALAZAR


photo of Coco Salazar

The process of selecting our next ambassador to Amsterdam may now proceed.

Ameriquest Mortgage Co. has agreed to a $325 million settlement with 49 states to resolve charges of alleged predatory lending, parent ACC Capital Holdings Corp. said Monday. The announcement follows one year of settlement negotiations and two years of investigation by attorneys general, state lending regulators and local prosecutors.

As part of the settlement, Ameriquest, which acknowledged in its statement no wrongdoing and noted no restrictions or limitations were placed on its licenses, agreed to "wide-ranging" reforms of its business practices, according to an announcement by the Office of California Attorney General Bill Lockyer.

"Our economic system cannot function properly unless businesses treat consumers fairly and honestly," Lockyer said in the written statement. "This settlement provides a good measure of justice by compensating victims of these previous practices and helping to ensure there are no victims in the future."

The investigation ensued hundreds of complaints submitted by Ameriquest customers nationwide to law enforcement officials and regulators, according to California's announcement.

Widespread consumer protection problems were uncovered, including: "inadequate disclosure of prepayment penalties, discount points and other loan terms; unsolicited refinancing offers, without adequate disclosure of prepayment penalties; improperly influencing and accepting inflated appraisals; and misrepresentations regarding consumers' credit ratings, and the availability and cost of future refinance loans," the announcement from the Golden State said.

"Doing the right thing for the people we serve has always been one of our core values," ACC Chief Executive Aseem Mital said in a written statement. "We regret those occasions when our associates have not met this ideal to our customers' expectations.

"This agreement is good for consumers and fair to the company."

Of the $295 million in restitution, $175 million will go to borrowers who obtained mortgages from Jan. 1, 1999 through April 1, 2003, and $120 million will be allocated to the settling states based on the percentage of loan volume held by consumers in each state, the office reported. The remaining $30 million of the total restitution will be paid to the settling states to cover their costs, and to fund consumer education and enforcement programs.

"You couldn't make a better argument than the attorneys general have just made that the states need the room to deal with mortgage abuses directly," said the Center for Responsible Lending, a consumer advocacy group, in an announcement. "As the subprime market has grown, abuses have exploded. The states and the federal government should work together to curb predatory lenders."

Part of the agreement, reportedly the second-largest lending settlement in history behind Household Finance Corp. in 2002, mandates ACC and subsidiaries, Ameriquest Mortgage Co., AMC Mortgage Services and Town & Country Credit Corp., to strengthen their standards, policies and practices.

Steps Ameriquest has reportedly agreed to take include improving disclosure of truth-in-lending terms, providing borrowers with a simple one-page form describing loan terms three days before closing and eliminating potential conflicts of interest in the loan origination and funding processes.

The agreement also mandates that Ameriquest provide the same interest rates and discount points for similarly-situated consumers and prepayment penalty cap periods on adjustable-rate mortgages. It also prohibits Ameriquest from soliciting refinances in the early years of ARMs if there is no evidence that the borrower is considering refinancing and from paying sales personnel incentives to include prepayment penalties in mortgages.

Ameriquest is also required to adopt policies to protect whistleblowers and facilitate reporting of improper conduct.

The agreement mandates reformation of Ameriquest's appraisal practices by removing branch offices and sales personnel from the appraiser selection process, "institute an automated system to choose appraisers from panels created in each state, limit Ameriquest's ability to get second opinions on appraisals, require Ameriquest to audit appraisers' work, and prohibit Ameriquest employees from influencing appraisals," according to California's announcement.

Ameriquest will also pay the costs of an independent monitor who will oversee the Orange, Calif.-based company's compliance with the settlement terms and submit annual compliance reports to the attorneys general at the end of 2006, 2008, 2009 and 2010, and on June 30 and Dec. 31 of 2007, California said.

California noted it will receive the largest share -- an estimated $47 million or more -- of the restitution funds because 108,031 loans valued at $23.3 billion represented the highest Ameriquest loan volume in the nation from 1999 through 2005.

Aside from attorneys general of 49 states and Washington D.C., the settlement was signed by lending regulators in 45 states, the office said.

The settlement clears the way for President Bush's nominee for ambassador to the Netherlands, Ameriquest founder Roland Arnall, to face the U.S. Senate for confirmation.


RELATED:

Ameriquest Settlement May Be Near
Ameriquest Mortgage Co. may settle charges brought on by 33 states and clear a path for the company's billionaire founder to take a job with the U.S. State Department.

Ameriquest Settlement Coincides with Bush Nomination
As Ameriquest Mortgage Co. sets aside $325 million for a potential settlement with regulators in 30 states over allegations of unfair lending practices, the firm's billionaire founder is being considered for a U.S. Ambassador post.


Coco Salazar is an assistant editor and staff writer for MortgageDaily.com.

e-mail: [email protected]


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