Ameriquest Loan Volume Plunges

Times Staff Writer

Ameriquest Mortgage Co.'s decision to close all 229 of its retail branches and eliminate 3,800 jobs follows a steep decline in its lending volume and attempts to find a buyer, according to analysts who follow the home-loan business.

The Orange-based lender said Friday that it was not for sale. But it has been squeezed hard by rising interest rates and bitter competition. Ameriquest officials said loan volume plunged 46% to $2.6 billion in the first quarter from $4.8 billion a year earlier.

What’s more, it spent last year dealing with government investigations of alleged predatory lending practices at some of its branches. In January, it settled with 49 states by agreeing to pay $325 million and reform its procedures to protect consumers.

The reforms, including the hiring of an outside firm to monitor compliance with the agreement, “adversely impacted the cost structure, thus reducing retail branch profitability,” said Scott Valentin, an analyst at Friedman, Billings, Ramsey & Co., in a note to investors.

Privately held Ameriquest is a specialist in the so-called subprime market for people with credit problems or other issues that prevent them from obtaining lower-cost loans. Almost all its loans are refinancings of existing debt.


With interest rates rising, fewer people are looking to refinance -- triggering a wave of layoffs in the industry and leading to predictions that weaker lenders would be acquired or shut down. Competitors such as Saxon Mortgage in Glen Allen, Va., and ECC Capital Corp. in Irvine have closed retail offices to save money, Valentin noted.

Talk of an Ameriquest sale surfaced in October, according to David Olson, a veteran industry consultant at Wholesale Access, a mortgage research firm in Columbia, Md.

At an industry conference that month, Olson said, representatives of two investment firms told him they had a “book” on Ameriquest for potential buyers to review. He said he hadn’t seen the material.

Ameriquest spokesman Chris Orlando said the company “is not for sale, and hasn’t been for sale.” Ameriquest is a division of ACC Capital Holdings Corp., which also owns Argent Mortgage Co. and Town & Country Credit Corp. Orlando declined to comment when asked whether another division of ACC might be for sale.

ACC’s founder and owner, Roland E. Arnall, removed himself from the company’s management last year to accept a presidential appointment as U.S. ambassador to the Netherlands. His wife, Dawn Arnall, now serves as chairman.

Olson said there would be obstacles to any possible sale. One is that industry insiders think mortgage profits will continue to decline until at least the middle of next year. Even after the cuts announced this week, Ameriquest is among the least efficient mortgage companies, with large administrative costs, he said.

There also are concerns about Ameriquest’s reputation after the investigation by the states and a drumbeat of negative news stories.

“I don’t think it’s going to happen unless it’s a bargain basement price,” Olson said of a sale. “Who the heck wants to take on that image? I think it’s a poison name right now.”

Orlando declined to comment on Olson’s assertion that the company’s reputation had been sullied. He said that efficiency and changes in consumer had motivated Ameriquest to overhaul its strategy.

Complaints that Ameriquest employees deceived borrowers about expensive loan terms and falsified documents to get people into mortgages they couldn’t afford were the topic of a series of Times articles beginning in February of last year. That month, Ameriquest disclosed it was under investigation by a multistate task force.

According to National Mortgage News, Ameriquest Mortgage and its sister companies together were the No. 1 subprime lender in the first quarter of last year, originating $24.4 billion in loans. Irvine-based New Century Financial Corp. was a distant second, with $10.2 billion for the quarter.

By the end of the year, however, Ameriquest’s fortunes had declined. In the fourth quarter, Arnall’s companies made $15 billion in loans, while New Century originated $15.7 billion and Wells Fargo & Co.'s subprime operations lent $17.7 billion, the trade publication reported.

The 3,800 job cuts announced Tuesday, from a staff of 11,000 people, did not include reductions at Ameriquest Mortgage’s biggest sister company, Argent, which makes its loans through independent brokers rather than directly to consumers.

In addition to employees at Ameriquest’s branches, about 400 at the company’s headquarters were handed pink slips.

Orlando said that as Ameriquest goes forward, the company would benefit from its core strengths, including its “branding” campaigns and its ability to develop sales leads. Those leads, as in the past, will be generated from the company’s headquarters in Orange, he said, with salespeople pursuing them from four call centers, including a huge facility near Sacramento, rather than from the branches.

The idea, he said, was to get ahead of industry trends, cutting the cost of doing business and lowering rates and fees paid by its customers amid competition that has sliced profits to the bone.

“Consumer behavior is really moving away from customers walking into a retail business to purchase a mortgage face to face,” he said.

Consumers’ use of the so-called direct mortgage channel -- getting a loan via the phone and the Web rather than from a broker or loan agent -- indeed appears to be growing, though it is unclear exactly how much.

A Mortgage Bankers Assn. survey showed that the direct channel accounted for 8% of all subprime loans in 2001, 9% in 2002, and 12% in 2003 before falling to 9% in 2004 and 7% in 2005, said Jay Brinkman, an economist with the association. Brinkman noted that the two-year decline occurred as do-not-call lists reduced the ability of businesses to cold-call consumers.