Ameriquest Settlement Is Due Next Week

By Kirstin Downey
Washington Post Staff Writer
Saturday, January 21, 2006

State prosecutors and lending regulators next week plan to announce a $325 million settlement with Ameriquest Mortgage Co., the nation's largest home lender to people with bad credit, according to numerous sources involved in the negotiations.

The announcement will probably be on Monday.

The Orange, Calif.-based firm, which has specialized in making high-cost home loans to people who do not qualify for less expensive mortgages, has agreed to the settlement to resolve charges brought by a multi-state task force that has been investigating allegations that the company overcharged and defrauded consumers, according to the sources. Thousands of homeowners nationwide have alleged in lawsuits that they were financially injured, in some cases losing their homes, being forced into bankruptcy or seeing their credit destroyed, after they obtained Ameriquest loans they were unable to repay.

As part of the agreement, the company will also change business practices at ACC Capital Holdings, the holding company for three retail subsidiaries, Ameriquest Mortgage Co., Town and Country Credit Corp. and AMC Mortgage Services Inc., according to those sources. Outside monitors will observe the company's operations to ensure that it operates in accordance with the agreement, they said. In some cases, specific practices will be barred.

Members of the task force, which includes Maryland and the District, would not publicly confirm the reports. More than a half-dozen government officials confirmed the impending settlement. The sources spoke only on condition of anonymity because the states and the company had pledged to each other that they would maintain confidentiality until the agreement was publicly announced. No attorneys general were willing to comment on the record about what the settlement will entail.

Late Friday, Ameriquest officials acknowledged that an agreement is near.

"This agreement is good for consumers and good for the company," the company said in a written statement. "We worked closely with the states to address their concerns. These improved business practices will enhance our ability to serve our customers."

On Friday, the White House informed some members of the Senate Foreign Relations Committee that the settlement would be announced on Monday.

The Bush administration has watched the settlement negotiations carefully because billionaire Roland E. Arnall, Ameriquest's founder and principal shareholder, is President Bush's nominee to be ambassador to the Netherlands. The Foreign Relations Committee deadlocked 9 to 9 in November on Arnall's nomination after several senators expressed concern about the unresolved litigation with the states.

The vote was along party lines except for Sen. Chuck Hagel (R-Neb.), who voted against Arnall. He said at the time that he did not think the United States should send abroad as its representatives people who are under what he called a "cloud of investigation."

Arnall has been Bush's single largest campaign contributor since 2002. He has also been a prominent campaign contributor to many Democrats, including U.S. Rep. Tom Lantos (D-Calif.), who endorsed Arnall's nomination at the Senate hearing.

The task force has never specified the allegations made against Ameriquest in 33 states and the District, but Arnall disclosed the information in writing to the Senate committee as it considered his nomination.

According to Arnall, the attorneys general alleged that the company had pressured appraisers to inflate property values so borrowers could get bigger loans, charged upfront fees without reducing interest rates as promised and told borrowers to ignore written information about interest rates because they would give them lower rates later. The company is alleged to have given them the higher interest rates instead.

According to Arnall's written testimony, the company is also alleged to have assured borrowers their loans would have no prepayment penalties, then inserted such payments into the final loan documents; delayed the time period between the loan closing and the funding; and misrepresented fees and costs.

At the November Senate hearing, Arnall acknowledged that Ameriquest had not handled its dealings with customers "perfectly" and that some employees had been fired.

"Mistakes have been made," Arnall said at the hearing. "When mistakes are made, we take care of the problems. We fix the problems."

Connecticut Attorney General Richard Blumenthal said he could not discuss any specifics about the negotiations, but said that many consumers had been badly damaged in their dealings with Ameriquest.

"What we've seen in human terms is catastrophic damage for some individuals who were misled or deceived or who received loans greater than they could possibly afford because of inflated income levels or appraisals resulting from employee misconduct," Blumenthal said. "We're taking action that will be designed to stop these abuses and effectively scrutinize and monitor these systems going forward. The abuses are systemic in number and nature."

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