This piece ran in today's LA Times:
Ameriquest Prepares to Settle States' Probe
The Orange County mortgage giant allots $325 million to end an inquiry into allegations of loan abuses. The firm has denied wrongdoing.
By E. Scott Reckard and Kathy M. Kristof, Times Staff Writers
The stock market lost 8 trillion dollars over `the dot. gone' scandal. Those responsible for pedaling these grossly inflated stocks also denied charges of wrongdoing. 8 trillion down the toilet and a handful of firms were fined an average of 2 billion a piece...and they were allowed to stay in business. This is justice?
Ameriquest Capital Corp., the No. 1 lender to homeowners with bad credit, said Thursday that it had earmarked $325 million to help resolve a 30-state investigation into complaints of overcharges, hidden fees, puffed-up appraisals and fabricated borrower income statements.
No final settlement has been reached with the Orange-based parent of Ameriquest Mortgage Co., a task force of state attorneys general said in a statement.
This is a persistent pattern. Shady companies routinely screw consumer and then `settle' the suit behind closed doors for a tiny fraction of the damage they have inflicted on the public.
But they said they "do not disagree" with Ameriquest's estimate of its liability -- a step toward resolving the largest of many legal disputes involving the politically influential company, a sponsor of Major League Baseball, Paul McCartney's halftime show at the last Super Bowl and the Rolling Stones' U.S. tour this fall.
Disclosure of the potential settlement sum came on the same day that President Bush nominated Ameriquest's chairman and sole owner, billionaire Roland E. Arnall, to be U.S. ambassador to the Netherlands.
Business as usual? I'm not sure what disgusts me more, the fact that this guy (who was probably wealthy to begin with) became a billionaire by screwing people that wouldn't have otherwise qualified for the usurious loans he made to them or that due to his political connections, he's going to weasel out of it for chump change.
If there is one thing that's been pissing the people of this nation off it has to be total lack of justice when it comes to big time swindles like this.
Arnall and his wife, who live on a 10-acre estate in the Holmby Hills neighborhood of Los Angeles, contributed $5 million to a pro-Bush committee in 2003 and chipped in $1 million for Bush's second inauguration party.
Arnall also is a member of the Committee on the Present Danger, a foreign policy group that advocates a hard line against Islamic terrorists.
"I am humbled and honored by the confidence the president has placed in me," Arnall, 66, said in a statement. "If I am confirmed by the Senate, I will devote all of my efforts to the important work ahead."
Like being safely out of the country when his house of cards comes crashing down.
The White House declined to comment on Arnall's relationship to Bush or elaborate beyond a brief statement saying his nomination had been sent to the Senate. Arnall declined to be interviewed; an outside public relations advisor to Ameriquest said the timing of the nomination and the $325-million liability reserve was coincidental.
Timing is everything and it's a bit worrisome that this guy is choosing this moment in time to cut and run. The real estate market is cooling off and Chinese are shuffling their currency deck. Like the insider trading on 9/10/01, does this guy know something that we don't?
Ameriquest, founded by Arnall as Long Beach Savings in 1979, has faced off with consumer activists, regulators and private litigants in a series of disputes over its lending practices dating to 1996.
The company has paid millions of dollars in restitution and for borrower education, and it has adopted a series of "best practices" improvements to its operating policies.
However, Ameriquest has admitted no legal liability in its settlements; it has described them as the best way to avoid distracting and expensive litigation.
Borrower education? Most of them wake up real quick when they start reading what they've gotten themselves into with the stroke of a pen. 1996 rings a bell for some reason. Besides being the year NAFTA was signed into law, weren't there some major changes made to the interstate banking laws around that time that resulted shortly thereafter with these mortgage giants popping up out of nowhere?
A Times story in February laid out complaints by former employees that unrelenting pressure to make loans created a "boiler room" atmosphere, causing some employees to deceive customers, forge loan documents and encourage borrowers and appraisers to misstate facts. The story reported that Ameriquest generated far more complaints to regulators than its competitors.
Ameriquest, whose slogan is "Do the right thing," has denied that there has been a systematic pattern of lending abuses. Arnall and his executives have attributed problems to outside mortgage brokers and rogue employees who, Arnall has said, have been disciplined or fired when wrongdoing has been revealed.
A spokesman for Arnall said Thursday that his attitude was, "Try to learn from these situations, and constantly try to improve your practices."
Best practices? Take `em long and deep, right?
A $325-million settlement would be by far Ameriquest's largest to date, dwarfing an agreement reached last month in San Mateo County Superior Court. In that case, the company agreed to pay as much as $50 million, plus $10 million to plaintiffs' lawyers, to end a class-action lawsuit alleging that thousands of borrowers in California, Texas, Alaska and Alabama were victimized by "bait and switch" tactics that stuck them with more expensive loans than they had been promised.
After cutting themselves in for hefty `origination' fees, naturally the loans cost more than originally quoted. It's amazing how much a little `blemish' on your credit rating can cost you in the long run. What's more amazing is how these predators are allowed to get away with it!
The amount Ameriquest announced Thursday also would be the second-largest settlement ever by a lender to "sub-prime" borrowers -- those who can't get cheaper loans because of bad credit, heavy debt or other issues.
Household Financial Corp., now part of London-based HSBC Holdings, paid $484 million in 2002 to end an investigation into its sub-prime lending by a 50-state task force.
Screw the public for billions, pay a little fine then go right back to what you were doing in the first place. Where the hell is the justice? If you tried pulled the same stunt they'd lock you up for loansharking!
Also that year, Citigroup Inc. agreed to pay $240 million to settle allegations of lending abuses at its CitiFinancial finance unit. The charges were brought by the Federal Trade Commission and by a class-action lawsuit.
Despite Ameriquest's recurrent legal run-ins, many analysts and competitors credit the firm with helping to generally bring down borrowing costs for sub-prime customers over the years. Using computers to streamline operations and assess the risk of loans, and finding an increasing appetite on Wall Street for securities backed by loan payments, Ameriquest and a few rivals have narrowed the gap in rates and fees between prime and sub-prime loans, the company says.
Was this run down in the rates a public service or testament to the dearth of investment opportunities out there?
Ameriquest Capital says it originated more than $82 billion in mortgage loans last year through its various subsidiaries. The loans were mainly refinancings that let homeowners take cash out of their home equity.
Amid the U.S. housing boom, sub-prime mortgage originations totaled $530 billion nationwide last year, up from $95 billion in 1996, according to a report by brokerage Friedman, Billings, Ramsey & Co.
This relates directly to the `false economy' and the fact that many people have been keeping their heads above water by religiously milking the cash cow they live in. When this well runs dry there is going to be one hell of a drought!
Ameriquest disclosed the $325-million set-aside in a filing with the Securities and Exchange Commission. Although the company has no public shareholders, it must make certain disclosures to holders of bonds backed by its loans.
Ameriquest said the reserve provision put it in technical default on its own borrowings from two of a dozen Wall Street firms that have provided financial backing, but the company added that it expected to receive a waiver from the firms.
Although the set-aside is large, Ameriquest and Arnall appear well able to make such a payment. Financial statements filed with regulators and obtained this week by The Times show the company raked in $7.6 billion in revenue from 2002 through 2004, and turned a profit of more than $2.7 billion during that period, after paying expenses.
There you have it good citizen, this is `the American way', making a fortune off of the misfortune of others.
Ameriquest's profit last year alone was more than $1.3 billion -- about four times the amount it put aside to cover its liability in the multi-state probe.
Ameriquest declined to comment on the financial statements. As a private firm, it is not required to publish them widely.
Arnall was ranked No. 321 on Forbes magazine's latest list of the world's billionaires. His net worth was listed at $2 billion.
Some consumer advocates said Thursday that the large settlements paid by major sub-prime lenders were beginning to look like just one more cost of doing business.
This is akin to employers that are repeatedly fined for deaths in their places of business. They pay the fine because it's cheaper than fixing the problem...profits before people.
"If all they are doing with this settlement is compensating borrowers for their losses, there is no incentive to stop doing this," said Ken McEldowney, executive director of Consumer Action in San Francisco. "The only thing that will clean up this industry are heavy punitive damages or criminal penalties."
Doug Heller, executive director of the Foundation for Taxpayer and Consumer Rights in Santa Monica, took issue with Arnall's nomination to be ambassador to the Netherlands.
"His companies have engaged in unfair and deceptive practices too many times to count," Heller said. "These executives should be headed to the pen, not some diplomat's mansion."
Margot Saunders, counsel to the National Consumer Law Center in Washington, said her concern in any settlement by Ameriquest would be preserving consumers' rights to individually sue the company.
Isn't this the point of all out of court settlements, to screw the consumer? If you missed out on the judgement, it's your bad.
Ameriquest has said in previous SEC filings that the multi-state task force raised concerns about lending policies at two of the company's smaller lending subsidiaries -- Town & Country Credit and Bedford Home Loans Inc. -- along with Ameriquest Mortgage.
Some attorneys general say a final settlement probably would include a new round of changes in the company's practices, with court-ordered sanctions available if serious problems reemerged.
The problems go back "several years, and others are continuing to this day," said Massachusetts Atty. Gen. Tom Reilly.
"Any resolution will require a significant payment by Ameriquest, including restitution to harmed consumers," Reilly said, "and significant changes in the way Ameriquest does business."
Special correspondent Mike Hudson contributed to this report.
Somewhere down the line our government opened to door to what amounts to legal loan sharking. Some credit card companies are charging as much as 30% interest!
Money is the gun that is held to the head of every one of us. Our ability to survive and to provide for our families depends on our ability to earn enough money. Gone are the days when you could eke out an existence from the soil. Now your only options are to live on the streets, sell yourself to (hopefully) the highest bidder or a life of crime.
If this article is anything to go by, it looks like a life of crime is by far the most rewarding route!
Make no mistake about it good citizen, our legal system sanctions these predatory if not outright criminal activities regardless of who is in the White House.
Thanks for letting me inside your head,
Gegner