Mortgage Daily Logo

BK Judge Rules Against Ameriquest

Mortgage News

BK Judge Rules Against AmeriquestDecision was previously overturned

April 12, 2007


A bankruptcy judge has suggested his ruling against Ameriquest Mortgage Co. could open the door for a class action lawsuit on behalf of all the company’s borrowers who are operating under Chapter VIII bankruptcy. At issue is how the lender reported and applied payments.

The Orange, Calif.-based company’s accounting practices were deemed “wholly unacceptable for a national mortgage lender” by the bankruptcy judge — who then fined the company $750,000 for punitive and emotional distress damages .

The amount in punitive damages, $500,000, had to be “significant enough to garner its [Ameriquest’s] attention” and “encourage” the company to “conform its accounting practices to what is required under the Bankruptcy Code,” wrote U.S. Bankruptcy Judge Joel B. Rosenthal of the District of Massachusetts when explaining why those damages were set so high.

For a violation of RESPA, debtor and plaintiff Jacalyn S. Nosek was awarded “nominal damages of $1.00.”

Under her bankruptcy plan, Nosek made separate and regular payments for pre-bankruptcy petition delinquent payments and for post-petition payments on which she had kept current, according to court documents. However, all her payments were posted to only the oldest outstanding pre-petition delinquencies.

“Although Ameriquest claimed to have manually credited Nosek with having made the payments and internally considered her current, nothing in its accounting system, or on the payment history provided to her, reflected this,” Rosenthal noted in his March ruling that upheld an earlier decision by the U.S. District Court for Massachusetts.

Further, “the payment history Ameriquest generated for the rest of the world gave the impression that Nosek was delinquent in her payments. It did not show that Nosek was current, something she claimed prevented her from refinancing her note with another lender,” he pointed out.

“Our accounting of the payments,” an Ameriquest spokesman told, “was consistent with industry standards and state and federal law. The District Court agreed with that position and overturned the bankruptcy judge’s original ruling. The facts have not changed and we are confident our appeal back to the District Court of the bankruptcy judge’s recent ruling will again be successful.”

In its appeal of the earlier decision, Ameriquest said that the requirement that it had to “apply post-petition payments in accordance with the terms of the [Bankruptcy] Plan” was an “erroneous belief.”

“Lenders,” countered Rosenthal, “do not decide which of its [bankruptcy code’s] provisions apply to them.”

Ameriquest also had argued in a reply brief that Chapter 13 did not require lenders to change their accounting procedures and thus readjust their accounting methodologies and continually recalculate how payments should be applied. The company further maintained that it could not use its computer system to track bankruptcy payments because no software exists to track such payments and thus they could only do it manually for its internal system.

But Rosenthal declared that “Ameriquest must adjust its accounting practices” for this bankruptcy, even if this requires accurately accounting for payments by manual methods. But he said that the court “is not convinced that a computer system could not be developed with the appropriate investment of time and money.”

Payments must be accounted for accurately, not only internally, Rosenthal wrote in his opinion, but also must be reflected in Ameriquest’s external payment history, “which is shared with the debtor and the outside world and which is usually necessary for a refinancing, something a lender of Ameriquest’s experience should recognize.”

Plaintiff Nosek was quoted as saying that when she saw Ameriquest’s payment history for her account that “doesn’t represents my payments post-petition” she felt like she had been “sucker punched” in the stomach. She said that “to get another mortgage, they need to see that I was making the correct payments … and this doesn’t show that. I was devastated. I felt there was no hope.”

Rosenthal noted that of the 437,000 loans that Ameriquest serviced as of July 2006, nearly 7,200 involved borrowers who are currently Chapter 13 debtors.

“Ameriquest uses the same accounting system in servicing all of its Chapter 13 debtors, which shows how widespread the problem could potentially be,” he warned.

Andrew Nelson, managing attorney in the bankruptcy department at the Chicago law firm of Pierce & Associates P.C., which represents many mortgage banking companies, told that servicing systems at many servicer shops utilize the same method as Ameriquest. The case demonstrates, he said, that servicers should be very cautious when posting and sending out payment histories of borrowers who are in Chapter 13.

Ameriquest has filed a notice of appeal in the case.

next story

back to current headlines

Related Posts

NewDay USA CEO Rob Posner Expects 10% Increase in 2019 Mortgage Loan Volume

There is No Such Thing as a Free House …

Over the past several years, those who service loans in the State of Washington(1) have seen a dramatic rise in the number of lawsuits in which delinquent borrowers seek to quiet title to their homes on the grounds that lenders are barred from foreclosing based on...

NewDay USA CEO Rob Posner Expects 10% Increase in 2019 Mortgage Loan Volume

The Mortgage Graveyard 2018 Archives

The Mortgage Graveyard 2018 Archives Failed, Struggling and Acquired Mortgage-Related Companies Non-Bank Closures 3 Bank Failures (FDIC) 0 Credit Union Failures 0 Total Mortgage-Related Failures 3  

NewDay USA CEO Rob Posner Expects 10% Increase in 2019 Mortgage Loan Volume

MBS Statistics

MBS Statistics Non-Agency Issuance 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 Private Label RMBS Issuance (S&P) $80 billion to $100 billion (est) $70 billion $34...

NewDay USA CEO Rob Posner Expects 10% Increase in 2019 Mortgage Loan Volume

Sample E-Mail

Sample E-Mail   Covering the Real Estate Finance Since 1999  Mortgage Industry News free news content | view headlines online  Advertorial Text Ad This ad includes a linked bold headline of up to 50 characters and up to 100 words of text. The ad can be...

Popular posts

How Long Does It Take to Refinance a Mortgage
How Long Does It Take to Refinance a Mortgage

So, you’re interested in refinancing your mortgage. Maybe you want some extra capital to do that home project you’ve always dreamed of, interest rates are nearing record lows, or you want to start consolidating debt. Regardless of the motivation behind the refinance,...

How Does Refinancing a Mortgage Work
How Does Refinancing a Mortgage Work

A home purchase is considered an investment, and a robust one at that. Savvy owners are constantly looking for new ways to reduce debt, save money, pay less in interest, and ultimately build equity. Refinancing is one way to leverage your investment and do just that....

What Does It Mean to Refinance Your Home
What Does It Mean to Refinance Your Home

You can think of refinancing your mortgage as a debt redo. Essentially, you’ll swap out the existing loan for a new one - ideally with better terms and conditions. Only this time it could help you save money on high mortgage payments, rather than just borrow it....

Setting up the Utilities in My New House
Setting up the Utilities in My New House

All the tedious, time-consuming home closing documents have been signed, sealed, and delivered. Your belongings are packed into what seems like a million boxes and you have a solid plan to haul all your existing furniture to the new place. Just as your boxes and...

When Is My First Mortgage Payment Due?
When Is My First Mortgage Payment Due?

Navigating your way through a brand new mortgage loan can be a difficult task, especially for first time homeowners. After handing over a large sum of money for the down payment and closing costs, it’s important to pay attention to the timing of your first mortgage...


Don’t worry, we don’t spam

calculate your monthly mortgage payment

Related Topics

Helpful Links

Daily mortgage rate trends

Best mortgage lenders

First-time homebuyers programs by state

Loan limits by state

Types of mortgages

APR vs interest rate

Understanding PMI