AMERIQUEST, ACORN PARTNER ON PILOT LENDING PROGRAM;
MORTGAGE FIRM COMMITS $360 MILLION
AND DEFINES ‘BEST PRACTICES’
‘Breakthrough’ Agreement on Fair Lending Standards
Unites Industry, Activists
WASHINGTON, D.C. – JULY 26, 2000 – In an accord that marks a breakthrough in cooperation between the subprime home mortgage industry and community activists, Ameriquest Mortgage Company and ACORN (Association of Community Organizations for Reform Now) today announced a pilot lending program designed to provide families in low-income neighborhoods with counseling and access to loans. The program will offer $360 million in mortgage financing over a three-year period – and set strong new consumer protection standards for the subprime lending industry.
In addition to the agreement with ACORN, Ameriquest has adopted an unprecedented set of consumer safeguards that will define industry-leading standards of ethics in home mortgage lending.
"Helping families achieve ‘the American dream’ of homeownership is the heart and soul of Ameriquest’s mission," said Kirk Langs, president of Ameriquest – one of the nation’s largest lenders to consumers with impaired credit ratings. "With this partnership for new investment in low and moderate income housing, ACORN and Ameriquest will unite in helping families gain high-quality housing – with a range of consumer safeguards and education that will also help them achieve long-term financial security."
"The ACORN pilot with Ameriquest is an exciting new program that offers families in low income neighborhoods a better deal than they will get with any other subprime lender," said Maude Hurd, national president of ACORN. "ACORN members and others in low income neighborhoods need access to credit to become homeowners; to repair their homes; and to meet other critical financial goals. This program will deliver loans to meet these needs – and it will do so offering the strongest safeguards and the best terms in the industry. Just as important, this initiative will help raise the bar for the rest of the subprime industry."
The three-year pilot program will make subprime mortgage financing available – with the industry’s strongest set of consumer safeguards – to residents in up to 10 low- and moderate-income urban neighborhoods around the country in which Ameriquest has branches. In addition to Ameriquest’s mortgage financing, ACORN and its affiliate ACORN Housing Corporation will provide consumer information, financial education and loan counseling services to community residents. The pilot program cities are:
- Albuquerque, New Mexico
- Baltimore, Maryland
- Chicago, Illinois
- Dallas, Texas
- Houston, Texas
- Jersey City, New Jersey
- Los Angeles, California
- Oakland, California
- Philadelphia, Pennsylvania
- St. Louis, Missouri
"The ACORN-Ameriquest pilot program includes provisions that are far better than those available anywhere else in the subprime market, including critical measures such as no prepayment penalties, a 3% limit on fees, interest rates 50 points below average, and no credit life insurance," added Hurd. "These provisions are just what ACORN Housing Corporation’s mortgage counseling clients have been looking for."
"These new safeguards – the strictest standards in our industry – will help ‘elevate the vision’ for good corporate citizenship among all subprime mortgage lenders," said Langs. "We are in the forefront of a public-spirited reform effort to raise the level of consumer protection and public service throughout our industry."
"We applaud Ameriquest for enhancing its code of "Best Practices" – in particular their precedent-setting willingness to extend the rescission period to 7 days from the standard 3 days," said Hurd. "Ameriquest’s code puts the company on record in opposition to many of the outrageous practices that are all too common in the subprime industry."
The new "Best Practices" code of conduct was formulated during a series of meetings among senior Ameriquest officials and leaders of two nationally recognized community activist groups: ACORN and the Consumer Mortgage Education Consortium (CMEC). CMEC is an organization formed in 1996 with the support of Ameriquest and three leading Washington, D.C.-based civil rights organizations – the Leadership Conference on Civil Rights, the National Fair Housing Alliance and the National Association of Neighborhoods.
"Working families deserve a fair deal in our society, and these new standards will help make sure they get a fighting chance for success in our economy," said Wade Henderson, co-founder of CMEC. "Ameriquest has long been recognized for its strong ethical standards, and these ‘Best Practices’ will show every lender that good corporate citizenship is also a good way to do business."
The "Best Practices" include:
- A one week "rescission" period – instead of the 3 days required by law – this allows borrowers to take the final, signed loan terms and compare competing terms from other potential lenders or seek advice from other sources;
- The full and timely disclosure of loan terms and conditions in plain English;
- Determining, before a loan is made, whether an applicant has the ability to pay the loan back – thus reducing the risk of default and foreclosure;
- A commitment to reasonable points and fees;
- A prohibition against "flipping" its loans through frequent efforts to persuade borrowers to refinance their loans;
- A prohibition on balloon payments and negative amortization loans;
- Reporting of borrower repayment histories to credit bureaus – thus allowing conscientious borrowers to improve their credit ratings;
- A continuing ban on the sale of single-premium credit life-insurance policies;
- A continuing practice of maintaining an arm’s-length relationship with such third parties as title companies and loan appraisers;
- Marketing based solely on financial criteria, without regard to a potential borrower’s age, gender, ethnic origin or income level;
- Monitoring of loan pricing and fair lending patterns;
- The creation of a pilot program to donate foreclosed properties to community groups; and
- Fair collection practices.
"Providing reasonably priced credit to borrowers who have been denied loans by conventional lenders helps people get the capital needed to work their way out of financial problems," said Langs. "By setting strong ethical standards, and by supporting programs that promote nationwide financial education for home buyers and homeowners, we will show the industry that consumer protection is good for borrowers and good for lenders."
"Full disclosure, competitive pricing and access to sound financial advice from many sources are essential factors in ensuring consumer protection," added Langs. "By adopting this enhanced package of ‘best standards,’ Ameriquest hopes to inspire the entire industry to reinforce its commitment to consumers. Fair access to credit is the foundation of economic opportunity, and these standards will assure that borrowers can make well-informed decisions about the loans they seek and the credit they need."
About Ameriquest Mortgage Company:
Ameriquest is the nation’s largest retail subprime lender. We are a residential mortgage company that originates, purchases, sells and services specialty finance mortgage loans. The company currently operates 193 retail branches in 30 states, and has over 2,700 employees. Our borrowers typically seek to consolidate debt and reduce their monthly payments. The majority of our loans are made to specialty finance borrowers who are unable to qualify for traditional credit because their credit history, income, or other factors cause them not to conform to standard agency lending criteria.
About ACORN:
ACORN is the nation’s most successful national association of low and moderate income community organizations, and is celebrating its 30th anniversary in 2000. ACORN’s most important strength is its commitment to building large scale organizations of low and moderate income families which have the power to achieve justice for their members, for their communities, and for the nation. ACORN has over 150,000 low and moderate income members, organized into 700 neighborhood chapters in 40 cities across the country.