Ameriquest Will Pay $325 Million and Reform its Lending Practices to Resolve States’ Investigations
(Wilmington, DE): Attorney General Carl C. Danberg announced today that Ameriquest Mortgage Company, the nation’s largest sub-prime lender, has agreed to pay $295 million to consumers and make sweeping reforms of practices that states alleged amounted to predatory lending. Ameriquest also will pay a total of $30 million to the 49 states and D.C. that are participating in the settlement agreement for costs of the investigation and consumer education and enforcement. Delaware consumers could receive an estimated $194,000 for restitution as eligible Ameriquest customers. The remaining funds received will be used for consumer education and projects and for costs and fees.
“I am pleased that this multi-state action has produced such significant results for consumers both in Delaware and around the country, particularly those consumers who may be more susceptible to predatory lending tactics,” said Danberg.
The $325 million payment ranks as the second-largest state or federal consumer protection settlement in history, after the $484 million predatory lending agreement reached in 2002 between most states and Household Finance Corporation.
Law enforcement officials and financial regulators initiated their investigation after receiving hundreds of complaints from Ameriquest customers across the country. The ensuing investigation uncovered consumer protection problems in areas governed by the settlement. The alleged improper practices included: inadequate disclosure of prepayment penalties, discount points and other loan terms; unsolicited refinancing offers that did not adequately disclose prepayment penalties; improperly influenced and inflated appraisals; and encouraging borrowers to lie about income or employment to obtain loans.
Ameriquest is the nation’s largest sub-prime mortgage lender. Ameriquest primarily makes refinancing loans to existing homeowners who are hoping to consolidate credit card and other debt into their new home mortgage and come out ahead with overall monthly savings. Borrowers who don’t have the best credit ratings may turn to sub-prime loans, which often have higher interest rates and other costs.
Under the agreement, Ameriquest is required to:
* Provide the same interest rates and discount points for similarly-situated consumers.
* Provide full disclosure regarding interest rates, discount points, prepayment penalties, and other loan or refinancing terms.
* Not encourage prospective borrowers to falsify income sources or income levels.
* Overhaul its 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.
An independent monitor will oversee Ameriquest’s compliance with the settlement terms. The monitor will have broad authority to examine Ameriquest’s lending operations, including access to documents and personnel. The monitor will submit periodic compliance reports to the Attorneys General during the next five years. Ameriquest will pay the monitor’s costs.
Restitution will be made to eligible Ameriquest customers who obtained mortgages from January 1, 1999 through December 31, 2005 with payments based on a formula set by the states. Delaware consumers do not need to take any action at this point to pursue recoveries – they will be contacted in the months ahead as specific recovery terms and plans are determined.