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For Immediate Release
January 23, 2006
Media Contact:
Kevin Enright 410-576-6357

CURRAN ANNOUNCES AMERIQUEST WILL PAY $325 MILLION AND REFORM ITS LENDING PRACTICES TO RESOLVE STATES’ INVESTIGATIONS

Maryland Attorney General J. Joseph Curran 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. Maryland borrowers will receive more than seven million dollars to reimburse transactions made between consumers and Ameriquest. Ameriquest will also pay a total of $30 million to 49 states and D.C. that are participating in the settlement agreement for costs of the investigation and consumer education and enforcement.

“This is a huge settlement, but we believe Ameriquest did a lot of damage to consumers,” said Attorney General Curran. “With this agreement in place Ameriquest’s practices will change.” 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.

Curran’s Consumer Protection Division worked with the office of Commissioner of Financial Regulation Charles Turnbaugh and with Attorneys General and state banking regulators from around the country on this multistate investigation. Consumers do not need to contact the Attorney General or the Commissioner of Financial Regulation at this time. Consumers who may be entitled to restitution will be identified from Ameriquest’s records and contacted.

In the agreement, Ameriquest denies all the allegations raised by the states, but the company agreed to a battery of new standards to prevent what the states alleged were unfair and deceptive practices. Curran’s office believes that Ameriquest employees deceived consumers as part of high-pressure tactics to sell mortgage refinances and that these high-pressure sales tactics were used to reach desired sales levels and high monthly individual sales quotas. These tactics were induced by a lopsided commission structure.

Astronomical growth over the last few years has made Ameriquest 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.

Injunctive Relief:
About half the 49-page agreement with the states spells out "injunctive relief" -- wide-ranging reforms of the company’s lending practices to resolve the concerns of the states.

Under the agreement, Ameriquest is required to:

  • Provide the same interest rates and discount points for similarly-situated consumers.
  • Not pay sales personnel incentives to include prepayment penalties or any other fees or charges in the mortgages.
  • Provide full disclosure regarding interest rates, discount points, prepayment penalties, and other loan or refinancing terms.
  • 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.
  • Not encourage prospective borrowers to falsify income sources or income levels.
  • Provide accurate, good faith estimates
  • Limit prepayment penalty periods on variable rate mortgages
  • Not engage in refinancing solicitations during the first 24 months of a loan, unless the borrower is considering refinancing.
  • Use independent loan closers.
  • Adopt policies to protect whistle-blowers and facilitate reporting of improper conduct.

The agreement also provides for appointment of an independent monitor to 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.

Today’s development culminates about two years of investigation by the Attorneys General, state banking regulators and local prosecutors -- and a year of settlement negotiations.

The settlement with the states includes ACC Capital Holding Corporation (the holding company), and its subsidiaries Ameriquest Mortgage Company, Town & Country Credit Corporation, and AMC Mortgage Services, Inc., formerly known as Bedford Home Loans. The company is based in Orange, California, near Los Angeles. Consumers who have loans originated by one of these companies between January 1999 and December 31, 2005 may qualify for restitution.

Law enforcement officials and 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.

   

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