As head of the Justice Department’s civil rights division, Deval L. Patrick brought a case against Roland E. Arnall’s mortgage lending company for allegedly piling extra charges onto home loans for minorities, women and the elderly.
Arnall’s firm ultimately agreed to settle a government lawsuit by paying $4 million to compensate borrowers and to teach consumers how to shop more smartly for loans.
That was nearly a decade ago. Today, new allegations of unfair lending practices are dogging Arnall and his ACC Capital Holdings Corp., casting a shadow over his nomination as ambassador to the Netherlands.
But in a twist, Patrick has emerged as one of Arnall’s stalwart supporters. Patrick sits on the board of Ameriquest Capital Corp.'s parent company and recently wrote the Senate Foreign Relations Committee on Arnall’s behalf.
“He really stepped forward,” Patrick, who is African American, said of Arnall’s willingness to address the charges raised against Long Beach Mortgage Co., which evolved into Ameriquest. “He used the experience to make a better company.”
Patrick’s stance underscores a sharp division on Arnall’s nomination.
Prominent civil rights advocates, some of whom represent groups that have received significant donations from Ameriquest, are among Arnall’s leading supporters. But other advocates for the poor and minorities say they are deeply concerned about Ameriquest’s lending practices, including alleged “bait-and-switch” tactics that unfairly raise the cost of home mortgages.
They want the nomination held up by the full Senate until Ameriquest settles an investigation by 33 states and the District of Columbia into its lending practices.
“I don’t think it sends a good message that an ambassador to an important ally like the Netherlands has a cloud hanging over him,” said Sen. Barack Obama (D-Ill.), an African American member of the Senate Foreign Relations Committee.
Behind the scenes, the lender is trying to nail down a $325-million settlement that would break the logjam and probably assure Arnall’s confirmation.
Meanwhile, others have lobbied for the nomination to be approved without delay. When the publicity-shy Arnall trekked to Capitol Hill for his confirmation hearing last month, his supporters inside the Senate Foreign Relations Committee room included Wade Henderson, head of the Leadership Conference on Civil Rights; Shanna Smith, head of the National Fair Housing Alliance; and Ricardo Byrd, head of the National Assn. of Neighborhoods, which pushes for economic development of minority and low-income communities.
All three groups have benefited from Arnall’s philanthropy. As they tell it, Arnall, 66, is a believer in human rights, a value forged earlier in life when his Jewish family was forced to hide out in German-occupied France during World War II.
Their support has gotten members’ attention, if not defused the concerns.
“Let me say at the very outset that you have a very commendable life story, and I have great respect for it,” said Sen. Paul S. Sarbanes (D-Md.), who has emerged as Arnall’s chief interrogator on Capitol Hill. “You have a number of friends who are friends of mine.”
Orange-based Ameriquest is the nation’s largest lender in the so-called sub-prime market to people with credit problems, who lack documented income or who have other issues that prevent them from getting lower-cost prime loans.
The Federal Reserve said in a September report that African Americans and Latinos were more likely than whites or Asians to be saddled with these higher-cost loans -- a fact that cannot be fully explained by differences in income or credit history.
The Fed’s report has fueled concern that low-income people and minorities are unfairly targeted by low-cost lenders. Predatory lending is “probably the biggest financial issue that is facing poor communities,” said Clayborne Carson, a civil rights historian at Stanford University and director of a project to edit and publish the Rev. Martin Luther King Jr.'s papers.
Ameriquest says it does not discriminate against borrowers or target customers based on race or income.
“Ameriquest prices loans using objective, statistically proven credit factors,” said Chris Orlando, vice president of corporate communications. “Our lending decisions are never based on the color of a person’s skin.”
Nonetheless, a coalition of activists has urged lawmakers to defer action on Arnall until a settlement is reached. These groups include Nehemiah Ministries, which works with a network of 300 African Methodist Episcopal churches to promote community development, the National Black Business Council Inc. and the Mexican American Political Assn.
“We oppose predatory lending of any kind,” said the Rev. Mark Whitlock, pastor of an Irvine church and chief executive of Nehemiah Ministries, which promotes economic development for church members.
In its 1996 settlement with the government, Ameriquest’s predecessor company did not admit wrongdoing but did agree to help bankroll efforts by community groups to improve education about mortgage lending.
That agreement helped foster continuing relationships between Arnall and national civil rights activists.
The Leadership Conference on Civil Rights, for example, last year received more than $250,000 from Ameriquest for training and other organizational needs.
Henderson, who has insisted that the money comes with no strings attached, declined to comment for this article.
Byrd acknowledged that his association had received “a considerable amount” of money from Arnall over the years, much of which has been used to educate activists about the sub-prime mortgage market and its potential benefits for those in need of credit.
But Arnall is “a man of integrity,” Byrd said, adding that Ameriquest ran into trouble with the states because it did not police its loan agents as well as it should have as the company rapidly expanded amid a boom in home refinancings.
Patrick, who is seeking the Democratic nomination for governor of Massachusetts, said one of his earliest impressions of Arnall came when they met to negotiate the 1996 Long Beach Mortgage settlement at the Justice Department.
“We sat around my conference table, we talked it through, and I’ll never forget Roland saying to me: ‘How am I supposed to explain this to my mother ... that I’m being sued by the Justice Department for violations of human rights?’ ”
Arnall took a constructive role in the settlement talks and went on to support higher industry standards, Patrick said.
About a year ago, Arnall invited Patrick to become a board member of ACC Capital Holdings, the parent of Ameriquest.
Patrick, who declined to reveal his compensation as a board member, said he accepted the offer because he thought good could come of his involvement.
“He wants to do the right thing,” Patrick said of Arnall.