Reilly urges consumers to avoid Ameriquest
AG: Firm persists in unfair practices despite accords
Disclosing the details of a $325 million settlement between Ameriquest Mortgage Co. and 49 states, Massachusetts Attorney General Thomas F. Reilly advised consumers to avoid doing business with the California mortgage company.
Reilly, who is running for governor, said Ameriquest's unfair lending practices have persisted despite several regulatory actions against the company during the past decade. The current settlement, if approved by the courts, would be the fourth agreement that Ameriquest has entered into since 1996 over its lending practices.
''This is a very bad company engaged in despicable practices," by failing to disclose it was extracting high fees from customers' home equity when it refinanced their home loans, Reilly said at a press conference yesterday. Reilly's conference coincided with others around the country describing the agreement with 49 states and the District of Columbia in which the mortgage company said it would overhaul its lending practices.
''They have been doing it a long, long time," he said. ''I would personally have nothing to do with this company."
The settlement disclosure, coming on the eve of Reilly's official declaration of his intention to seek the Democratic candidacy for governor, has become entangled in state politics. One of Reilly's Democratic opponents, Deval Patrick, a former assistant US attorney for civil rights, sits on the board of Ameriquest's holding company, ACC Capital Holdings.
Patrick's spokesman, Khalil Bird, said yesterday that Patrick has no intention of resigning from the board. He said Patrick has devoted his career to ensuring people are treated fairly -- while at the US Justice Department, he was involved in numerous discriminatory lending cases -- and joined ACC's board ''with the intention of making sure people were treated fairly and that the company, through this process, sets a new standard. And that's what he's done."
Ameriquest specializes in the ''subprime" market, which provides mortgages to individuals whose poor credit ratings prevent them from seeking financing from traditional mortgage lenders.
''We're very proud of what Ameriquest has done over the past 25 years to make credit available" to credit-strapped customers, Ameriquest spokesman Ian Campbell said. ''We're eager to get going on implementing these new provisions" and ''believe these are practical, workable measures that will help us do a better job."
State officials investigating Ameriquest alleged that loan officers concealed high interest rates and fees from consumers and improperly inflated home appraisals and borrowers' income to justify making larger loans that generated higher fees. Reilly said one ''extraordinary" provision of the settlement requires Ameriquest to pay for an independent monitor, such as a lawyer or financial counselor, to oversee each mortgage closing.
In 1996, the company, then known as Long Beach Mortgage, agreed to pay $4 million after the US Department of Justice said it charged minorities and the elderly more than other customers for mortgages. In 2001, the Federal Trade Commission suspended an investigation after Ameriquest promised to adopt ''best practices" and pledged $360 million for low-cost loans to borrowers. Three years ago, the Massachusetts Division of Banks settled for $5.6 million charges Ameriquest did not disclose to customers they paid fees, known as ''points," on their loans.
Massachusetts's $12.2 million share of the national settlement is the seventh largest among the states. But attorneys and housing activists said the restitution is insufficient to compensate customers for their losses.
Many customers said they lost thousands or tens of thousands when they paid high fees or interest rates that were never disclosed. Some have been thrown into foreclosure because they could not pay rapidly escalating monthly payments.
Of the $325 million settlement, $295 million will go to consumers as restitution and $30 million to reimburse states for the cost of the investigation. State officials estimate some 725,000 US families were affected, for an average return of $406 per borrower.
Kimberly Blanton can be reached at blanton@globe.com. 