Ameriquest to Close Branches

Reorganizing Subprime Lender Will Slash Staff by a Third

The parent company of Ameriquest Mortgage Co., the mortgage lender that this year reached a $325 million settlement with regulators and prosecutors over allegations of predatory lending practices, yesterday announced a reorganization that will shutter all its 229 retail branches and lay off 3,800 employees nationwide.

California-based ACC Capital Holdings Corp., which is the nation's largest lender to home-loan borrowers with poor credit, said the restructuring will allow it to centralize operations and reduce costs. The company will consolidate into a handful of regional offices, operating out of California, Arizona, Illinois and Connecticut. It will shrink is staff by a third, dropping from 11,000 employees to about 7,200.

"Although difficult, the decisions announced today are the best strategy for improving our cost structure and increasing our ability to price loans competitively -- changes that are critical to our long-term success," Adam J. Bass, the company's vice chairman and a nephew of company founder Roland E. Arnall, said in a statement.

In January, state prosecutors and lending regulators in 49 states and the District announced the $325 million settlement, one of the biggest consumer-protection settlements in U.S. history. More than 240,000 borrowers will receive compensation from the settlement to make up for losses they suffered after getting loans from Ameriquest. The company also agreed to make major changes in how it does business.

Ameriquest customers around the country had alleged in lawsuits and to state officials that they were misled about upfront fees, given higher interest rates than they were promised and stuck with prepayment penalties. They also alleged that the lender inflated their incomes or home-appraisal valuations so they could qualify for loans they could not afford. Some said that their credit had been destroyed and that they lost their homes.

Ameriquest denied all wrongdoing but said the settlement would lead to "improved business practices" that would enhance its ability to serve its customers.

Iowa Attorney General Tom Miller said the restructuring was a business decision made by the company on its own, but he said he thought the firm would find the changes helpful.

"Centralization in various forms allows them to have a better chance of compliance," he said. "Decentralization . . . can get companies off into violations."

He said the announcement is a "bold move in a way" because the company will change how it markets its products.

Michael Moore, the former Mississippi attorney general who coordinated the landmark tobacco-industry settlement, is monitoring Ameriquest's progress in revamping its business practices. Miller said the company is cooperating.

The investigation into Ameriquest's activities drew heightened scrutiny last year after Arnall, a major White House campaign contributor, was nominated by President Bush to become U.S. ambassador to the Netherlands. Arnall's nomination was gridlocked in the Senate Foreign Relations Committee after several senators urged him to resolve the controversy before taking on diplomatic duties.

In February, one month after the settlement between the states and Ameriquest was announced, Arnall was confirmed by the Senate. Last month, he presented his credentials to Dutch Queen Beatrix. The billionaire has said he would pay special attention to immigration issues in Europe.

Thomas Morgan, president of Lendertraining.com, a Rockville-based mortgage training company, said Ameriquest's shift in business structure probably reflects changing times, with more lenders operating out of call centers rather than retail operations. He said the move will also permit the company to refocus on its expertise in debt consolidation while maintaining its strength in call-center operations.

"Nobody believes Ameriquest is going away," he said.

The company's restructuring, which affects its Ameriquest and Town & Country Credit retail subsidiaries, comes during a widespread home lending industry slowdown, as home sales slow and interest rates rise.

"The business is changing right now," Morgan said. "We are seeing it across the board."