State, 1,000+ Maine Consumers To Get Over $1 Million From Ameriquest Settlement

January 23, 2006

Attorney General Steve Rowe and Consumer Credit Regulation Director Will Lund today announced that Maine has joined other states in settling claims against Ameriquest Mortgage Company, the nation's largest sub-prime lender and the second-largest mortgage lender in Maine. Ameriquest has agreed to pay $295 million to consumers, including 1,124 from Maine, who were harmed by unfair practices and to make sweeping lending reforms. Affected consumers will be contacted by mail. Ameriquest will also pay a total of $30 million to the 49 participating states and the District of Columbia for costs of the investigation and consumer education and enforcement. Ameriquest admitted no wrongdoing. The $325 million total payment ranks as the second-largest state or federal consumer protection settlement in history, after the $484 million predatory lending agreement reached in 2002 between most states and Household Finance Corporation.

Today's settlement concludes about two years of investigation and negotiation by the attorneys general, mortgage lending regulators, and other prosecutors. Consumer complaints sparked the investigation, which led officials to allege that Ameriquest and its agents inadequately disclosed prepayment penalties, discount points and other loan terms; improperly influenced and inflated appraisals; and encouraged borrowers to lie about income or employment to obtain loans.

Attorney General Rowe said, "The mortgage is a necessity for most Maine homeowners. Mainers have a right to fair mortgages, fairly negotiated, but they weren't getting them from Ameriquest. Ameriquest employees deceived consumers and used high-pressure tactics to sell mortgage refinances due to a lopsided commission structure. This agreement should change all that."

"Maine consumers have complained to our office about many of the practices addressed in this settlement," said Will Lund, Director of the Office of Consumer Credit Regulation. "This agreement will compensate those consumers and will serve as notice that such practices will not be tolerated." Lund said that 15 Maine consumers have filed complaints against Ameriquest in the past two years.

Under the agreement, Ameriquest is required to:

  • Provide the same interest rates and discount points for similarly-situated consumers.
  • Provide full disclosure regarding interest rates, discount points, prepayment penalties, and other loan or refinancing terms.
  • Overhaul its appraisal practices by removing branch offices and sales personnel from the appraiser selection process, instituting an automated system to select appraisers from panels created in each state, limiting the company's ability to get second opinions on appraisals, and prohibiting Ameriquest employees from influencing appraisals.
  • Provide accurate good faith estimates.
  • Limit prepayment penalty periods on variable rate mortgages.
  • Use independent loan closers.
  • Adopt policies to protect whistle-blowers and facilitate reporting of improper conduct.

The agreement forbids Ameriquest from:

  • Paying sales personnel incentives to include prepayment penalties or any other fees or charges in the mortgages.
  • Encouraging prospective borrowers to falsify income sources or income levels.
  • Engaging in refinancing solicitations during the first 24 months of a loan, unless the borrower is considering refinancing.

The agreement also provides for appointment of an independent monitor to oversee Ameriquest's compliance with the settlement terms. The monitor will have broad authority to examine Ameriquest's lending operations, including access to documents and personnel. The monitor will submit periodic compliance reports to the Attorneys General during the next five years. Ameriquest will pay the monitor's costs.