Customers accuse Ameriquest of excessive fees, altered terms

Ameriquest Mortgage Co., which disclosed last week it reached a tentative $325 million settlement with Massachusetts and 29 other states over allegations of deceptive sales practices, faces lawsuits nationwide by customers who said the subprime lender charged them excessive fees or changed the agreed terms on refinancing loans when they arrived to sign the final documents.

Eight lawsuits, including one filed in US District Court in Boston in February, are seeking class-action status. Massachusetts borrowers said their loan fees and interest rates differed from what they had agreed to when they negotiated to refinance their homes, often to pay off household debts. California-based Ameriquest, the suit said, then ''uniformly promised" to refinance them a second time, sometimes within months, ''on more favorable terms," to recoup additional fees.

If the attorneys general settle, said Boston lawyer Gary Klein, who specializes in mortgage cases and represents the Massachusetts borrowers, ''it very clearly won't wrap up the private class-action litigation."

Ameriquest spokesman Chris Orlando said he could not comment on specific allegations. In an e-mail, he denied the company's fees are too high and said it complies with state laws governing subprime loans.

According to MortgageDaily.com, Ameriquest's parent company, ACC Capital Holdings Corp., is the nation's largest subprime lender, based on $82.7 billion in mortgage volume in 2004, including $3 billion in Massachusetts. Subprime loans are for people with credit scores too low for them to qualify for a traditional mortgage.

The litigation parallels charges being brought by Massachusetts Attorney General Thomas F. Reilly and officials in 29 other states. Investigators found Ameriquest in violation of state lending and consumer laws, used ''bait and switch" tactics in often unsolicited phone calls to potential customers, did not disclose steep penalties charged for paying loans off early, and falsified borrowers' incomes to ensure they would qualify for the loan, said officials briefed on the multistate investigation.

Reilly's office declined to comment but said it has received 133 complaints about Ameriquest since 2002. Deborah Harris, who owns the Cambridge home her great-grandfather purchased 115 years ago, complained this spring. She had found the lender online to refinance her 30-year, fixed-interest rate mortgage and reduce her monthly payments.

The consulting company secretary said she negotiated a fixed, 6.05 percent rate for 30 years, but learned, after the August 2004 closing, her rate was variable, exposing her to rising payments if rates rise. She also said Ameriquest failed to escrow money for her property taxes. Angry about the loan, she refinanced with another lender, requiring her to pay $8,600 in prepayment penalties to Ameriquest.

''Never once was it said to me I was signing a variable rate loan with a prepayment penalty," she said. ''When you make $50,000 a year, would you take out a loan that you could lose your house? No way -- and that's what I told them."

Orlando said Ameriquest ''fully discloses" loans terms, and it introduced an online system in July so borrowers can ''see their loan terms throughout the entire process." The average interest rate on its loans is 7.21 percent, the company said, in line with industry standards for subprime loans, which charge higher rates than traditional mortgages due to higher risk borrowers who are more likely to default.

In a Securities and Exchange Commission filing, ACC Capital disclosed it set aside money for a tentative settlement with the states, but the company said there is ''no assurance such an agreement will be reached." Reilly's office said, ''any resolution will require a significant payment by Ameriquest, including restitution to harmed consumers."

In July, Connecticut's Department of Banking reached a $7 million settlement with Ameriquest and two other ACC units, Argent Mortgage Co. and Town & Country Credit Corp. The company agreed to reimburse 350 customers whose loan fees exceeded limits set by state law by $3,000, on average, state officials said. In settling, Ameriquest did not admit or deny guilt.

In the Boston metropolitan area, Ameriquest is the second-biggest lender of refinancings in the subprime market, said James Campen, research associate for the Mauricio Gaston Institute at the University of Massachusetts at Boston. The company has 10 branches in the state.

The Massachusetts suit was filed by eight borrowers tapping their home equity, including Isabelle and David Murphy, who own a Plympton house. To consolidate two car loans and credit cards, Ameriquest refinanced their Wells Fargo mortgage, which had a 5 percent fixed rate, taken out when the Murphys bought the house. The couple, in their late 30s, said Ameriquest promised a 5.75 percent fixed rate, the suit said.

At the closing, they were concerned about a variable rate and about $8,537.18 in points charged, the suit said. Points typically are paid in return for a lower rate, which they said they did not receive. They closed, the suit said, because they were told ''they could refinance within four to six months."

Kimberly Blanton can be reached at blanton@globe.com.