Is the Ameriquest empire assembled by Roland E. Arnall about to be dismantled?
The Los Angeles billionaire’s financial lending business has declined sharply since his appointment as ambassador to the Netherlands in February. On Monday, his holding company sold car-loan subsidiary Long Beach Acceptance Corp. to a Texas buyer for $282.5 million.
Some believe that Arnall’s big home loan units, Ameriquest Mortgage Co. and Argent Mortgage Co., could be next to go.
Ameriquest Mortgage agreed to pay $325 million in January to settle allegations of predatory lending practices. Four months later it said it would eliminate 3,800 jobs and shut down 229 retail branches.
Once the No. 1 lender in the so-called sub-prime market, designed for people with blemished credit or other issues, Ameriquest has tumbled to seventh place this year, according to data tracker Inside Mortgage Finance.
David Olson of Wholesale Access Mortgage Research & Consulting Inc., based in Columbia, Md., is among those who think a sale or outright closure of Ameriquest and Argent is increasingly likely. The sub-prime market “has been a disaster for the past six months,” he said.
National Mortgage News and other trade publications reported last week that JPMorgan Chase & Co. has been retained to take offers for all or part of ACC Capital Holdings, Arnall’s Orange-based holding company.
A JPMorgan spokesman said Tuesday that the investment bank had handled the sale of Long Beach Acceptance to AmeriCredit Corp. of Fort Worth. He declined to say whether other assets -- including Ameriquest and Argent -- were up for grabs.
Aseem Mital, ACC Capital’s chief executive, declined to discuss the potential for a sale of the company’s mortgage operations. In a statement, Mital said that selling the auto loan unit enabled ACC Capital “to focus our resources and efforts on our core mortgage business as we strategically position the company for the future.”
Ameriquest executives have described Paramus, N.J.-based Long Beach Acceptance as a minor part of Arnall’s empire. In ACC Capital’s audited financial statements for 2005, which were obtained this year by The Times, that assessment was reflected in the net worth assigned to each ACC subsidiary.
Long Beach Acceptance’s net worth was listed at $54 million, compared with Ameriquest Mortgage at $257 million, Argent Mortgage at $169 million and AMC Mortgage Servicing Inc., the company’s billing and collecting arm, at $344 million.
Irvine-based Town & Country Credit Corp., another of ACC’s mortgage lenders, was valued at $67 million.
Arnall and his wife, Dawn, who took over as chairwoman of ACC Capital, couldn’t be reached for comment Tuesday.
Arnall relinquished operating control of ACC when he became ambassador but remained the majority shareholder in the privately held company.
Ameriquest grew to be the nation’s largest sub-prime lender as home prices were rising and interest rates were falling, creating a robust lending market. But as housing sales have slumped this year and mortgage lending has declined, business has soured.
And although Ameriquest settled accusations by a 49-state task force that it misled borrowers about loan terms and pressured appraisers to overstate home values, Olson of Wholesale Access said the company still faced the threat of lawsuits by aggrieved borrowers.
“I can’t imagine who would want to buy them as a firm since there would be huge potential legal liability,” Olson said.
Several sub-prime lenders have been sold recently to Wall Street firms that package sub-prime mortgages into securities for sale worldwide. Tax preparation giant H&R; Block Inc. said last month that it would entertain bids for its Irvine-based Option One Mortgage Corp. sub-prime lending unit.
Now is not a great time to sell a sub-prime lender, analysts said, describing an environment with more would-be sellers of such companies. Nonetheless, these analysts said, it might be wise for an independent company such as Ameriquest to sell to a larger financial services firm rather than try to survive in the current difficult business setting.
Analyst Matthew Howlett of investment bank Fox-Pitt, Kelton Inc. said only a major financial company would be likely to acquire Ameriquest and Argent now -- perhaps a European bank that deals in mortgage-backed securities, given that Wall Street’s biggest mortgage securities companies already have purchased sub-prime lenders.
By slicing into profit margins in the sub-prime business, cutthroat competition has contributed to a decline in the performance of sub-prime loans this year, UBS Securities said in a report last month. It warned that this year’s sub-prime loans were falling into delinquency at one of the fastest paces on record.