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Ameriquest must pay $325M

The mortgage lender doesn't admit guilt, but the agreement with regulators is the second largest in U.S. history.

By HELEN HUNTLEY
Published January 24, 2006

Ameriquest Mortgage Co. will pay $325-million to settle regulators' complaints that the company cheated customers by inflating appraisals, falsifying income statements, charging unjustified fees, jacking up interest rates at closing and other unfair practices.

The agreement between the California company and state officials is the second largest consumer protection settlement in U.S. history. It includes a $295-million consumer compensation fund, a $30-million payment to the states and a promise of better behavior, although the company did not admit any guilt.

"This landmark agreement sets high standards that we expect other mortgage lenders to follow," Florida Attorney General Charlie Crist sai d Monday. Ameriquest negotiated the settlement with a committee of state attorneys general and financial regulators representing 48 states and the District of Columbia.

About $19-million of the consumer fund will go to Floridians who took out Ameriquest mortgages. The company has about 62,000 borrowers in the state, but it's not clear whether all of them will be eligible. Crist said Ameriquest customers will be notified about the process and need not take any action yet.

As part of its pledge for improved business practices, Ameriquest will have to give borrowers a simple one-page form clearly describing all loan terms at least three days before closing. Many borrowers have complained that they were surprised at closing with higher rates or terms inferior to those described to them during the application process.

Independent third parties will handle the closings to remove conflicts of interest and changes will be made in the appraisal process. According to some of the lawsuits filed against the company, when inflated appraisals were used in previous cases, some borrowers ended up owing more than their homes were worth and could not refinance with another lender.

Another problem cited in the cases were refinancings that only benefitted Ameriquest, which collected hefty fees.

Under the agreement, Ameriquest agreed not to refinance subprime loans unless there is a benefit to the borrower.

"This agreement is good for customers and fair to the company," said Aseem Mitai, chief executive of Ameriquest's parent company, ACC Capital holdings Corp.

The company announced last July that it was reserving $325-million to cover the pending settlement.

The settlement does not cover numerous lawsuits still in the courts, including at least 12 class-action cases.

Ameriquest borrowers will have to decide whether to accept compensation under the settlement agreement or reject it in hopes of receiving more from other legal avenues.

[Last modified January 24, 2006, 00:55:20]