Posted on 03/15/2005 8:43:05 AM PST by NormsRevenge
LOS ANGELES (AP) -- Home loan lender Ameriquest Mortgage Co. has agreed to pay as much as $50 million to settle a class-action lawsuit that alleges it cheated thousands of borrowers in four states, including California, a newspaper reported Tuesday.
In a related matter, the Orange County-based company also was questioned by attorneys general and regulators in 25 states about its lending practices, including how loan terms are verbally described to borrowers, the Los Angeles Times said.
Ameriquest, which lends to people with spotty credit and modest incomes, has been dogged by consumer complaints and lawsuits in about 20 states that accuse the company of fraud and falsification of documents.
The tentative settlement stems from a lawsuit that accuses Ameriquest employees of surprising borrowers with fees and interest rates that often were significantly higher than quotes in good-faith estimates of loan costs. A San Mateo County Superior Court hearing was scheduled June 24 for final approval.
Ameriquest would pay at least $15 million and no more than $50 million, the Times said.
The settlement would give refunds to some California borrowers who received loans from 1996 through February 2004, and customers in Texas, Alabama and Alaska who took out loans from 1998 through February 2004, the Times said. To qualify, closing loan rates must have been more than .9 percentage points than the rate in good-faith estimates.
Class members also could be entitled to a 50 percent refund of prepayment penalties if preliminary disclosures did not indicate that the loan was subject to such a penalty. Ameriquest said there are 1,671 such customers.
Ameriquest attorney Michael J. Cereseto said the settlement does not include an acknowledgment of liability.
"We are satisfied that the terms of the settlement are fair and that the settlement allows Ameriquest to focus all of its attention on providing credit to millions of Americans," the company said in a statement.
The company first disclosed it had been questioned by attorneys general and regulators in a Feb. 23 Securities and Exchange Commission filing, a prospectus for potential buyers of interest-paying bonds.
Ameriquest declined to identify the 25 states but said it had addressed the concerns with "valid responses."
"We are working to resolve the issues under discussion with these agencies," the company said in a statement. Connecticut Attorney General Richard Blumenthal said his state was concerned about the lender's excessive fees to refinance loans for existing customers.
The company, which requested a hearing to defend itself against Connecticut banking regulators, blamed a computer glitch for the alleged violations.
Ameriquest Mortgage, based in Orange, is a unit of privately held Ameriquest Capital Corp.
In 1996, the company, then known as Long Beach Mortgage Co., paid $4 million to settle charges by the U.S. Justice Department that its lending practices cheated minorities, women and the elderly.
The Federal Trade Commission suspended an investigation into Ameriquest's lending practices in 2001 after the company promised to adopt "best practices" standards for sub-prime lenders and pledged to make $360 million in low-cost loans to borrowers identified by ACORN, a national advocacy group.
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