Ken Paxton

Monday, January 23, 2006

Attorney General Abbott Announces Sweeping $325 Million Settlement With Ameriquest Mortgage

AUSTIN - Texas Attorney General Greg Abbott today announced a $325 million multi-state settlement with Ameriquest Mortgage Corp. to completely reform the company’s lending practices. The settlement will result in several major home finance reforms and refunds to thousands of affected Texas homeowners.

Orange, Calif.-based Ameriquest, the nation’s largest subprime refinance mortgage lender, will pay $295 million of the $325 million settlement to benefit harmed consumers, with an estimated $18 million in refunds coming to Texas homeowners who refinanced through Ameriquest since January 1999.

Mortgages may be the single most difficult and most important and valuable transaction most consumers will ever undertake, said Attorney General Abbott. Texas law requires that prospective homeowners be treated fairly, and this settlement ensures they will be. Just as important, this settlement is a model that will set the tone for fairer business practices across the industry. We commend Ameriquest for reaching this settlement.

The lengthy investigation by Texas and other states since 2004 concluded that Ameriquest and its employees engaged in high-pressure sales schemes to refinance mortgages for unsuspecting homeowners. The company has made an estimated $5 billion in home loans to Texans since 1999.

These consumers’ goal was to lower their monthly mortgage payments and consolidate some existing credit card or other consumer debt in the process, Attorney General Abbott added. Ameriquest, however, exploited this need, convincing homeowners the refinancing option would greatly benefit them, when in fact the opposite happened. The company pushed its employees to achieve high sales quotas and unrealistic sales commissions, all to the detriment of these homeowners.

The settlement with Texas, 48 other states and the District of Columbia prohibits the company from engaging in predatory lending and high-pressure tactics. Now, Ameriquest will offer the same interest rates and discount points for homeowners with similar credit histories, incomes and property values, and provide full disclosure of rates, points and prepayment penalties.

Ameriquest agreed to stop the practice of encouraging homeowners to falsify income sources or levels to qualify for refinancing loans that carry higher interest rates and benefit company employees. The company has also agreed to provide accurate, good-faith estimates and property appraisals and use independent loan closers.

Of the $295 million in promised restitution to consumers, the majority will be distributed in a nationwide claims process to those who obtained mortgages from Jan. 1, 1999, through April 1, 2003. This represents a period in which the company’s most egregious practices against homeowners occurred.

The remainder will be allocated based on the percentage of Ameriquest loans made to more recent borrowers in each state. These will be evaluated on a restitution formula that recognizes the company had improved its business practices with homeowners, although some financing problems still persisted and warranted consumer relief.

The settlement requires Ameriquest to make payments into a settlement fund over the next 12 months. The settlement administrator will then calculate the amount of payments to individual homeowners. Consumer restitution will begin after one year. Homeowners who are eligible for restitution will receive correspondence in the mail.

The settlement includes ACC Capital Holding Corp. and its subsidiaries, Ameriquest Mortgage Co., Town and Country Credit Corp. and AMC Mortgage Services Inc., formerly known as Bedford Home Loans.

Consumers who believe they may have been defrauded or misled by a mortgage company may call the Attorney General’s toll-free complaint hotline at (800) 252-8011 or file a complaint online at