Ameriquest’s Ads Reach Beyond Bad-Credit Niche

Ameriquest Capital Corp. has spent hundreds of millions to build name recognition for its mortgage companies over the last two years -- inking high-profile deals with pro baseball, football and auto racing, and sponsoring the Rolling Stones on their current U.S. tour.

The slogan for its Ameriquest Mortgage unit -- “Proud Sponsor of the American Dream” -- pays homage to its business of making home loans.

What neither the slogan nor the branding campaign says, however, is that Orange-based Ameriquest is almost entirely a supplier of “sub-prime” refinancings for homeowners who may not be able to get lower-cost prime loans because of bad credit, an inability to document their income or other financial issues.

Consumer advocates have complained for years that some people with good credit are often steered into more expensive sub-prime loans. The Ameriquest branding campaign -- with its broad slogan and lack of references to its sub-prime specialty -- is likely to attract many prime-worthy borrowers who don’t realize that the company doesn’t offer traditional mortgages, said Norma Garcia, a senior attorney for Consumers Union.

“They are clearly advertising to the prime market,” Garcia said. “They’re saying that they are for everyone -- and I think that’s true. They’re not going to turn anyone away just because they could qualify for a better prime loan.”

Gary Ruskin, executive director of Commercial Alert, a consumer group based in Portland, Ore., called it “broad-spectrum marketing of predatory loans.”

Ameriquest officials contend these critics miss the point. The branding is not a stand-alone tactic but a supplement to direct-marketing efforts, including mailers that are sent directly to potential borrowers who have credit problems, said Kevin Morefield, the company’s executive vice president for strategic planning.

Responses to direct-mail pitches jumped the day after Ameriquest ran TV ads during the Super Bowl this year, Morefield said, indicating that more recipients were opening the envelopes instead of chucking them into the trash.

Morefield said the company was aiming to expand beyond its traditional base of refinancing homes so borrowers could pay off debts such as credit cards or get some cash. As a step toward offering a full range of mortgages, Ameriquest this year introduced several new loan types aimed at home purchasers and refinancers who have good credit scores but can’t get traditional prime loans because of other issues, he said.

When Ameriquest launched its national branding strategy in spring 2004, Vice Chairman Adam Bass said the company was “moving beyond our nonprime lending roots” into a “new era ... beyond serving only borrowers with credit challenges.”

Morefield acknowledged last week that only a pilot program had been undertaken so far, but he said that expanding into prime loans remained a goal.

Companies have wide leeway to advertise as they see fit, but Ameriquest has been in a spotlight as it moves to settle an inquiry into its lending practices by attorneys general and regulators in 30 states.

The company has set aside $325 million toward a resolution, but the absence of a final agreement has sidelined, at least temporarily, the nomination of Ameriquest Chairman Roland E. Arnall as ambassador to the Netherlands. The Senate Foreign Relations Committee last week delayed a confirmation vote, saying Arnall should first resolve the investigation of Ameriquest by the states.

The company’s ad campaign is remarkable at least in part because sub-prime lenders have traditionally targeted customers with billboards, late-night TV ads or mailers with no-nonsense pitches to get prospects on the phone with loan agents, often with telltale cues such as “bad credit OK.”

As an extra marketing layer, Ameriquest’s branding campaign is an expensive proposition, said Bruce Miller, vice chairman of Dailey & Associates Advertising in West Hollywood who has worked on ad campaigns for several financial institutions including sub-prime lender Aames Home Loan.

Financial statements obtained by The Times show that privately held Ameriquest Capital’s advertising and marketing budget jumped from $65 million in 2002 to $365 million in 2004.

By contrast, No. 1 mortgage lender Countrywide Financial Corp. of Calabasas had more than four times the mortgage volume but spent about half as much -- $172 million -- on advertising and promotion.

Much of the spending by Ameriquest, including the sports sponsorships, direct mailings, and payments to the Rolling Stones, falls outside traditional ad categories such as newspapers, television and radio. But that mainstream spending also is enormous -- $145 million last year including $18 million by Ameriquest’s sister company, Argent Mortgage Co., according to TNS Media Intelligence, a market research firm.

From a practical marketing standpoint, Argent’s sponsorship of Indy Racing League driver Danica Patrick and pro golfer Jim Furyk don’t appear to make sense, said Michael Perry, chief executive of IndyMac Bancorp, a Pasadena thrift and mortgage bank that makes prime and sub-prime loans. Argent doesn’t deal directly with the public; instead it makes loans exclusively through mortgage brokers.

“Mortgage brokers aren’t going to be directing any customers to Argent because they saw Jim Furyk in a magazine,” Perry said.

In a statement, Argent said its research showed “targeted” sports marketing was an effective way to reach brokers.

Some of Ameriquest’s awareness advertising indirectly courts the sub-prime market by suggesting that the company is more understanding of apparent problems than others may be.

The ads that debuted during this year’s Super Bowl (in which Ameriquest sponsored Paul McCartney at halftime) fit in that category. “Don’t judge too quickly,” the tagline for the ads said. “We won’t.”

The current television and Internet promotions of the Rolling Stones don’t mention Ameriquest’s sub-prime status. Morefield said the intent of the Stones sponsorship was to familiarize the band’s core fans -- now middle-aged, many of them homeowners -- with the company, so they will respond to direct-mail pitches.

“What we want the brand advertising to do is to raise the awareness of the company generally,” he said. “The ‘open rate’ goes sky high when you put the Stones logo on the envelope.”