Probe of Ameriquest Sought in Pennsylvania
A legal aid group is calling on Pennsylvania regulators to investigate Ameriquest Mortgage Co., citing an alleged “pattern of unfair, deceptive and unethical conduct” that could be grounds for revoking its lending license in the state.
In a complaint on behalf of six Ameriquest borrowers, Community Legal Services Inc. of Philadelphia accused the Orange County-based company of using “bait and switch” tactics to stick borrowers with higher fees, rates and payments than promised.
The complaint to the Pennsylvania Department of Banking alleged that Ameriquest repeatedly had made “unsuitable refinancing loans to elderly and low-income homeowners that exceed their ability to pay, sometimes based on false or inflated income information.”
A spokesman said Ameriquest wouldn’t comment on specific regulatory inquiries and couldn’t comment on “details of our borrowers’ transactions.”
“However,” he said, “we are researching the claims under discussion. We work hard to treat our customers fairly and are particularly proud of the part we have played in assisting hundreds of thousands of Americans to secure credit and improve the quality of their lives.”
Carol Gifford, a Pennsylvania Banking Department spokeswoman, said regulators were reviewing the petition, which sought to illustrate a “pattern and practice” of deception by describing a series of impoverished, elderly or unsophisticated borrowers allegedly victimized by Ameriquest.
The legal aid group examined 10 loans, including loans to the six petitioners. Four of the six petitioners ended up with their properties in foreclosure, the claim said.
Ameriquest Mortgage and affiliated subsidiaries of its parent company, privately held Ameriquest Capital Corp. in Orange, are the biggest lenders in the so-called subprime mortgage business. The subprime industry finances home loans for people with blemished credit and other financial problems who may not be able to obtain lower-interest-rate loans.
In previous interviews with The Times, Ameriquest representatives said that the company wouldn’t tolerate ethical breaches by employees and that it worked hard to stamp out problems when they occurred. Putting customers into loans they couldn’t afford made no sense for Ameriquest, the spokesmen said, because the company typically had suffered large losses dealing with foreclosed properties.
In a report this month, the Pennsylvania Banking Department noted that only three states had a higher foreclosure rate on subprime mortgages than Pennsylvania’s 11.9%.
The report didn’t single out any lenders for criticism, but Pennsylvania’s banking commissioner, A. William Schenck III, pledged to beef up his department’s licensing and examination bureaus and to start an investigative unit to protect consumers from so-called predatory lending practices.
Alan M. White, one of the Community Legal Services lawyers who prepared the petition, said Schenck should consider action similar to that taken in Connecticut, where regulators have threatened to bar Ameriquest and two affiliates from originating mortgages after allegations that they charged excessive fees when they refinanced loans for existing customers.
“State licensing standards [in Pennsylvania] say a license can be denied to a lender who makes unethical or illegal loans,” White said. “The Banking Department may be able to go after practices that are technically legal, such as making loans that can’t reasonably be repaid.”
Asked why he had singled out Ameriquest, White said his legal aid office helped clients in 10 to 20 bankruptcy cases a month. Most are the result of a sudden shock such as a death, divorce or job loss, he said. But some result from homeowners’ simply being unable to handle mortgage payments -- and he said a disproportionate number of those were Ameriquest loans.
The petition noted that complaints about Ameriquest’s sales practices had attracted wide attention. One example, it said, was a report last month in The Times, which quoted former employees who alleged in lawsuits and interviews that Ameriquest loan agents, under pressure by managers, commonly misled customers into accepting unfavorable loans and falsified documents to win approval for mortgages.
Ameriquest disclosed recently that it was in talks with regulators in 25 states over concerns about its lending. Banking Department spokeswoman Gifford said she couldn’t comment on whether Pennsylvania was one of those states. Officials at the Pennsylvania attorney general’s office couldn’t be reached for comment.
