January 23, 2006
ANNOUNCES AMERIQUEST WILL PAY $325 MILLION AND REFORM ITS LENDING
PRACTICES TO RESOLVE STATES’ INVESTIGATIONS
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.
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
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:
the same interest rates and discount points for similarly-situated
pay sales personnel incentives to include prepayment penalties
or any other fees or charges in the mortgages.
full disclosure regarding interest rates, discount points,
penalties, and other loan or refinancing
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
each state, limiting the company’s ability
to get second opinions on appraisals, and prohibiting
Ameriquest employees from
encourage prospective borrowers to falsify income sources or
accurate, good faith estimates
prepayment penalty periods on variable rate mortgages
engage in refinancing solicitations during the first 24 months
a loan, unless the borrower is considering
independent loan closers.
policies to protect whistle-blowers and facilitate reporting
of improper conduct.
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
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.
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.