Agreeing to settle 29 class-action lawsuits alleging predatory lending, the Ameriquest group of subprime lenders has pledged $22 million to repay aggrieved borrowers and their lawyers -- a fraction of its payments in previous suits before it shut down as the mortgage meltdown set in.
The agreement potentially affects 712,000 borrowers from what once was the nation's largest subprime lender, based in Orange County. Many of the loans were from Argent Mortgage Co., an arm that funded borrowers through mortgage brokers.
Also settling were AMC Mortgage Services Inc., Bedford Home Loans Inc., Town & Country Credit Corp., Olympus Mortgage Co. and Ameriquest Mortgage itself.
The proposal, filed in U.S. District Court in Chicago last month, bars parties from discussing it. Its terms were spelled out in the letters mailed to borrowers beginning last week and online at https://ameriquestmdlsettlement.com.
The agreement covers loans as far back as Dec. 14, 2001, and sorts claims into five categories, including hefty upfront charges, interest rates that were higher than promised by nine-tenths of a percentage point or more, and loans with variable rates when fixed rates were promised.
Payments to borrowers will vary depending on the relative strengths and potential damages of each type of claim.
The proposal excludes borrowers who accepted previous individual and class-action settlements.
Those include Ameriquest's 2006 payment of $325 million to end an investigation by 49 state attorneys general who alleged it had deceived borrowers, falsified loan documents and pressured appraisers to overstate home values; and a San Mateo County private-party lawsuit on behalf of California, Texas, Alabama and Alaska borrowers that the company settled for $50 million in 2005.
The attorneys general settlement provided an average of more than $900 for borrowers who accepted it.
By contrast, the class-action settlement, which must be approved by a federal judge, works out to a bit more than $30 for each potential class member, and only $20 after administrative costs and the proposed distribution of $7.3 million in legal fees.
Because nonbank lenders such as Ameriquest sold their loans, they maintained very little capital and had few assets to recover when they closed up shop, said Benjamin G. Diehl, a deputy attorney general for California who helped craft the states' agreement with Ameriquest.
"Unfortunately, there isn't much left for borrowers," Diehl said.
The borrowers have until Feb. 22 to opt out of the settlement if they wish to pursue their own lawsuits. To receive settlement funds, they must fill out and submit a claim form no later than March 9. If they do neither, they would get no money and give up all rights to pursue damages.
Class-action lawyer Robert Green of San Francisco said about 20% of such claim forms typically are returned.
If that occurs in the Ameriquest class actions, it would boost recovery to an average of about $100 per claim.
The settlement includes no payment from the estate of Ameriquest founder Roland E. Arnall, a billionaire who died in 2008, or from the Wall Street firms that funded subprime lenders and transformed the loans into securities that proved toxic when the housing bubble burst.
"The abettors on Wall Street . . . got away untouched," said Christopher L. Peterson, a University of Utah law school associate dean who has testified to Congress about his research into subprime lending.