Ameriquest deal won’t make ‘big difference’

If you took out a mortgage from Ameriquest Mortgage Company during the past six years, you may be entitled to a piece of a $325 million national settlement over the sub-prime lender’s alleged predatory lending practices.

The settlement was announced Jan. 23 in New Hampshire by Banking Commissioner Peter Hildreth and Attorney General Kelly Ayotte.

New Hampshire — as one of the 49 states participating the settlement — will receive about $2.6 million, with an estimated $1.7 million going directly to Ameriquest borrowers. Since that has to be spread among about 6,000 or so borrowers in the state, the average award will be roughly $250 per mortgage. Some borrowers will get more, especially those who refinanced several times. But if the loan was taken out after 2003, the average will be slightly more than $170. And it might take as long as a year to get to the borrowers.

“That won’t make that big of a difference,” said Dinah Haycock, who refinanced her Epsom manufactured home though Ameriquest in 2004. As reported last summer by New Hampshire Business Review, the refinancing drove her loan amount up from $52,000 to $72,000, thanks to the inclusion of existing debt and closing costs, and her monthly payments ended up going up, not down, under the adjustable rate mortgage.

She said she is now behind on her loan payments by some $3,000 (though she disputes half that amount), and she said she has been warned that she could face foreclosure proceedings in the near future.

Haycock was one of the 23 Ameriquest borrowers who complained to the state Banking Department about Ameriquest’s lending practices since 2001.

Sub-prime loans go to borrowers who would have trouble getting a traditional loan, often at higher interest rates and less favorable terms. Such sub-prime loans are growing in popularity among all lenders, and Ameriquest — based in Orange County, Calif. — is the largest sub-prime lender of them all. The company aggressively markets the loans with heavy telemarketing and media advertising, such as its sponsorship of last year’s Rolling Stones concert tour.

Regulators have charged that the company has been too aggressive. The firm is not fully disclosing loan terms, slipping in hidden loan fees, approving some loans by distorting a person’s income or value of his or her home in order to make the loan and by pressuring overextended homeowners to refinance loans they could not maintain, they say.

“Our view was that Ameriquest employees deceived consumers as part of high-pressure tactics to sell mortgage refinances,” Attorney General Ayotte said. “We believe these high-pressure sales tactics were used to reach desired sales levels and high monthly individual sales quotas and were induced by a lopsided commission structure.”

Ameriquest has denied this, or at least that any deceptive practices were part of any company-wide policy. The company has maintained that it has corrected most of the practices.

The $325 million settlement is second in size only to a $484 million settlement involving unfair mortgage practices agreed that was reached in 2002 with Household International.

Settlement details

Some $295 million of the national settlement will go directly to borrowers. The rest goes to reimburse the states for cost. New Hampshire will get a little larger share of its settlement — $900,000, or more than a third — because the state Banking Department contributed more to data collection and negotiation than others.

That leaves roughly $1.7 million. Almost half of that money will go to those whose loans closed before Jan. 1, 1999, through April 1, 2003. In New Hampshire, that involves some 1,300 borrowers, meaning they will receive an average of $600 per loan. The 5,400 who closed after April 1, 2003, will receive the remainder, or an average of $171 per loan.

These numbers are approximate. Some borrowers may not be able to be contacted. Some may follow the advice of private attorneys — who say that the settlement amount is much too small — and join or stay in separate class action suits against Ameriquest.

The settlement also includes Ameriquest affiliates, Town & Country Credit Corp. and AMC Mortgage Services Inc., formerly known as Bedford Home Loans.

But both housing advocates and regulators are more concerned about how Ameriquest acts as opposed to what the company pays.

“While it’s great they are compensating for past practices, what would really make a difference is the way they advertise and disclose the true costs of their mortgages to their customers from here on in,” said Mary Downes, a housing counselor at CATCH, the Concord Area Trust for Community Housing, a nonprofit housing group based in Concord.

In the terms of the settlement Ameriquest does agree to correct a number practices targeted by critics, including:

• No incentives for sales personnel to include prepayment penalties or any other fees or charges in mortgages.

• Full disclosure regarding interest rates, discount points, prepayment penalties and other loan or refinancing terms.

• Overhaul of appraisal practices by removing branch offices and sales personnel from the appraiser selection process, instituting an automated system to select appraisers from panels created in each state, limiting the company’s ability to get second opinions on appraisals and prohibiting Ameriquest employees from influencing appraisals.

• Stop encouragement of prospective borrowers to falsify income sources or income levels.

• Provision of accurate, good faith estimates.

• Limit prepayment penalty periods on variable rate mortgages.

• No refinancing solicitations during the first 24 months of a loan, unless the borrower is considering refinancing.

• Use of independent loan closers.

• Adoption of policies to protect whistle-blowers and facilitate reporting of improper conduct.

The settlement is “good for consumers and good for the company. … These improved business practices will enhance our ability to serve our customers,” the company said in a prepared statement.

Ameriquest has agreed in prior settlements to improve its practices only to have some of the same charges repeated again. This time, however, a third-party monitor — paid for by Ameriquest — will audit practices. That should make a difference, said Hildreth.

“We fully expect Ameriquest will comply with our laws in the future,” Banking Commissioner Hildreth said. “There are valid reasons to believe this. Ameriquest has instituted many changes already. They do not want to repeat the experience that we are concluding today, and the States and a monitor will be watching them carefully.”

Hildreth also hinted that some of the $900,000 the banking department receives might be used to insure better compliance with mortgage lending laws in the future, either through better enforcement or consumer education.

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