LENDER
WOULD PAY $12M IN MASS.
Author(s): Kimberly Blanton, Globe Staff Date:
January 23, 2006 Page: A1 Section: Business
Massachusetts customers of Ameriquest Mortgage Co. would
receive $12.2 million under a nationwide settlement after
charges that the mortgage company had collected excessive
fees and interest rates on improper loans that homeowners
often could not afford to repay, a state official said yesterday.
Officials from Massachusetts and 48 other states plan to
announce today the details of the $325 million settlement
with Ameriquest, its parent company, and two affiliated
companies. The settlement, if approved by the courts, would
provide about $813 in restitution, on average, for each
of about 15,000 residents of the state who got Ameriquest
mortgages during the past six years. Massachusetts' share
of the settlement is the seventh-largest among the 49 states
and the District of Columbia. Virginia, where Ameriquest
does not operate, was excluded. If approved, the award would
be second only to a $484 million settlement involving unfair
mortgage practices ageed to by Household International in
2002.
Lawyers handling private lawsuits against the company criticized
the settlement funds as inadequate. The companies involved
in the settlement specialize in loans to middle-class and
working-class borrowers with poor credit ratings who would
not qualify for a traditional mortgage. While it is a common
practice to charge more for these loans, the states alleged
that Ameriquest's interest rates and fees were excessive.
"A pattern of consumer deception and fraud ends right
here with this settlement," Massachusetts Attorney
General Thomas F. Reilly said.
Reilly issued his comment in a statement released by his
office. "With this settlement, approximately $12 million
will be returned to Massachusetts consumers who were cheated
by Ameriquest," the statement said.
In a statement, California-based Ameriquest yesterday called
the agreement "good for consumers and good for the
company," which hammered out details of the settlement
with state attorneys general in recent months. "These
improved business practices will enhance our ability to
serve our customers," the company said.
Ameriquest is a national lender that aggressively markets
its mortgages on television, in mailings, and at sporting
events.
At the Rolling Stones concerts in Boston two weekends ago,
the company floated a blimp-shaped balloon that circled
the interior of the TD Banknorth Garden before the performance.
The companies participating in the settlement are: Ameriquest,
Town & Country Credit Corp., AMC Mortgage Services Inc.,
and their parent company, ACC Capital.
Ameriquest's ties extend into the Bush administration and
into the race for governor of Massachusetts.
Its founder, Roland Arnall, appointed Deval L. Patrick,
a former assistant US attorney for civil rights, to the
board of ACC Capital in 2004. Last year, Patrick, now a
Democratic candidate for governor of Massachusetts, supported
Arnall's nomination by the Bush administration to become
US ambassador to the Netherlands.
The settlement may help pave the way for Arnall's appointment;
his final confirmation was held up last fall by Democrats
concerned about the allegations against Ameriquest.
Reilly, who is an opponent of Patrick in the race for Massachusetts
governor, was among the attorneys general most involved
in negotiating the settlement with the mortgage company.
Patrick lauded the settlement in a statement as "very,
very good for consumers in Massachusetts" and nationwide,
and he credited Reilly and other state officials "for
working together to reach such a constructive conclusion."
"I am proud to be a part of it and hope that this
will be a model for reform that raises standards for lending
practices not only at Ameriquest but in the entire industry,"
he said.
A Boston lawyer, Gary Klein, is representing Ameriquest
customers in private class-action lawsuits claiming so-called
"predatory lending" practices.
Klein criticized the settlement as inadequate to cover
losses incurred after customers had signed the mortgage
documents. Many Ameriquest customers have lost their homes
in foreclosure, including many working people of modest
means who live in Lowell, Lawrence, and the Plymouth area.
Loan fees often amounted to $10,000 or more.
"Many of the affected homeowners paid tens of thousands
of dollars in fees and higher interest rates than they should've
had to pay, and under the settlement they'll only get a
small portion of that back," he said. Klein, a partner
with Roddy, Klein & Ryan, said many Ameriquest customers
now face the decision of whether to accept the attorney
generals' proposed settlement or wait for possibly greater
financial relief from class-action suits that have been
filed around the country against Ameriquest.
"They'll give up their rights" to participate
in the suits, he said, "if they take money in the AG
settlement."
Three individuals who have reviewed the settlement document,
and who spoke on the condition of anonymity, said the agreement
would place curbs on the company's lending practices for
example, requiring verbal disclosure of loan terms to customers.
Among the practices being investigated were claims that
the company's loan officers did not explain that low introductory
interest rates would rise in the future and push up borrowers'
monthly payments. Many borrowers said they were thrown into
foreclosure because they could not meet the higher monthly
payments.
They also detailed other terms of the settlement:
It would require loan officers to follow a script when
reviewing mortgage details with Ameriquest customers to
ensure that pertinent information is relayed and that customers
are better informed. Under the settlement, the lender also
agreed to provide loan documents, including material changes
in loan terms, to customers three days prior to closing.
It would eliminate incentives that state regulators said
encouraged Ameriquest employees to make loans with high
fees or closing costs. Last year, the company made some
changes to its commission program, but the settlement would
also prohibit regional managers in Ameriquest's offices
around the country from offering additional incentives that
might also encourage loan officers to make improper loans.
Commissions may also be reduced if a lending officer engages
in deceptive loan practices.
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