Layoffs by lender raise issues for Patrick

The nine Massachusetts branch offices of the huge mortgage company Ameriquest will close as part of a nationwide cut of 3,800 jobs, a move that again puts the Democratic gubernatorial candidate, Deval L. Patrick, in the position of defending his role as a well-paid director of the firm.

ACC Capital Holdings, the parent company of Ameriquest Mortgage and a smaller lending company, said the closings are part of a new strategy.

The cost-cutting decision followed a $325 million settlement that ACC reached in January with 49 states over allegations that it used predatory lending practices. These, critics said, were aimed at the elderly, members of minority groups, and low-income people.

Chris Orlando, a spokesman for the California company, said the firm would not provide information on how many Massachusetts workers would lose their jobs. But state regulators estimated yesterday that Ameriquest employs 40 to 90 people here.

Patrick's chief rival for the Democratic nomination, Attorney General Thomas F. Reilly, seized on the job cuts and said that Ameriquest had violated state law by not notifying state banking regulators of the closings. He said he would ''take immediate steps to ensure that Ameriquest customers in Massachusetts are protected."

''These measures are in place to ensure that consumers are protected," Reilly said. ''This is especially important for consumers who have loan applications pending."

Patrick, who joined the five-member ACC Capital Holding board in 2004, declined to comment yesterday. A spokesman said Patrick had worked to prevent the layoffs but had not succeeded.

The company refused to comment on Patrick's role.

''It is a tragedy whenever anyone loses a job through no fault of their own," his senior campaign adviser, Doug Rubin, said in a statement. ''As a board member, Deval Patrick worked with management to explore every available option to prevent these layoffs. In the end, this was the judgment of management about how to more effectively deliver their services in a challenging economic environment and a slowdown of the national housing market."

Patrick's role with the mortgage company moved into the Democratic primary discussion late last month, when Reilly challenged him to reveal the payment he receives for serving on the board. Patrick has declined to release compensation figures, saying only that he gets more than $100,000 for four or five meetings a year. He has promised to release more income details this month.

Patrick has said that he was asked by the firm's owner, Roland Arnall, to join the board to help the mortgage giant clean house, first in reaching the settlement over accusations of predatory lending in several states and then to implement systems and standards to ensure that the company's sales force does not engage in unfair practices. Arnall is a major contributor to President Bush and Republican causes.

As the chief of the US Justice Department's civil rights division in mid-1990's, Patrick persuaded Ameriquest to enter into a $4 million settlement with the Justice Department after the company faced charges that it and its corporate affiliates engaged in discriminatory pricing practices. It denied the allegations.

Chris Goetcheus, a spokesman for the state Division of Banks, said the state had found out about the company's decision to close branches from the Iowa attorney general's office, the lead negotiator for the states in their settlement with the company earlier this year.

Goetcheus said the Division of Banks will be ''weighing its options" on whether to sanction Ameriquest for not notifying Massachusetts officials directly. The company could face fines, he said.

''The proper notification should have been given . . . which they failed to do," Goetcheus said. He added that Ameriquest officials had assured the state Banking commissioner, Steven Antonakes, yesterday that Massachusetts customers' mortgages are safe.

''The important thing to note here," Goetcheus said, ''is that consumers' mortgages are secure."

The firm complied with the law, but is open to discussing the issue with state regulators, said Orlando, the Ameriquest spokesman. ''We believe that we are in compliance with applicable state laws and regulations, but, of course, we're fully prepared to discuss any regulatory concerns or questions with state officials."

The privately held company, the largest subprime lender in the Boston area, said the layoffs and the closing of 229 branch offices around the nation creates the ''new business model" that ''fully adheres to the company's previously announced agreement with the states."

Ameriquest wrote $3 billion in mortgages in 2004 in Massachusetts. The company said that the restructuring resulted from the change in recent years in how homeowners seek loans.

''We see a fundamental shift underway in how nonprime consumers shop for mortgage loans, away from bricks and mortar.

''This is about more than today's challenging mortgage-market conditions. It's about getting ahead of the competitive curve for the long term," Adam Bass, the firm's vice chairman, said in a written statement yesterday.

The company is consolidating its Northeastern operation in Connecticut. Other centers will be in California, Arizona, and Illinois. ACC said it will consolidate many functions in Orange, Calif.

Kimberly Blanton of the Globe staff contributed to this report.