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Workers Say Lender Ran 'Boiler Rooms'

Critics say Ameriquest, touted as an industry model, fabricated data, forged documents and hid fees. The company denies wrongdoing.

February 04, 2005|By Mike Hudson and E. Scott Reckard | Special to The Times

An East Palo Alto resident, Sara Landa, said Ameriquest employees tricked her into signing a mortgage that required her to pay $2,494 a month, more than she earns cleaning houses. All the negotiations were in Spanish, according to Landa's lawsuit, but all the loan documents were in English -- a language in which she's not proficient.

"The only thing she ever got from Ameriquest that was in Spanish was a foreclosure notice," said her lawyer, Nathaniel McKitterick.

Landa and Ameriquest reached a confidential settlement in December. Ameriquest did not admit wrongdoing. In its response to The Times, the company said it went to "great lengths to ensure customers are fully informed about loan terms so there are no surprises at the closing table."

Allegations of falsified documents are a common thread in the borrower lawsuits and in more than two dozen accounts from ex-workers.

In a suit filed Jan. 14 in U.S. District Court in San Francisco, Nona Knox claims that Ameriquest qualified her and her late husband, Albert, for a loan by fabricating documents showing that he earned $6,800 a month as proprietor of Knox Music Academy. At the time of the loan, the suit says, Albert Knox was 79 and suffering from terminal cancer. The music school never existed, the suit says.

"Mr. Knox had never played a musical instrument," said Aaron Myers, an attorney for Nona Knox, whose complaint against Ameriquest centers on other issues, including allegedly excessive closing costs. "This was truly made up out of whole cloth without their knowledge or consent, or any suggestion from them."

The company has not yet formally responded to Knox's lawsuit, which seeks class-action status. Before the suit, Ameriquest wrote to her attorneys denying anything was amiss with the loan.

Closing the Loan

Fifteen hundred miles away in suburban Kansas City, Kan., ex-employees describe a similar ploy: Ameriquest staffers allegedly fabricating borrowers' income and falsifying appraisals to make loans go through.

"Whatever you had to do to close a loan, that's what was done," said Brien Hanley, a former loan agent at the company's Leawood, Kan., branch. "If you had to state somebody's income at $8,000 a month and they were a day-care provider, who's to say it wasn't?"

Hanley said he quit because he was fed up with conditions at the company. He now works as a mortgage broker elsewhere.

Lisa Taylor, a former loan agent at Ameriquest's customer-retention office in Sacramento, said she witnessed documents being altered when she walked in on co-workers using a brightly lighted Coke machine as a tracing board, copying borrowers' signatures on an unsigned piece of paper.

Taylor contends in a lawsuit filed in Sacramento County Superior Court that she was fired for complaining about sexual harassment and widespread falsification of documents. Ameriquest has not filed a response to Taylor's allegations. Both sides have agreed to have an arbitrator decide the case.

Meanwhile, appraisers in six states said in interviews that Ameriquest had tried to bulldoze them into inflating home values and, in some cases, lying about property defects.

"Ameriquest is the king of this kind of thing," said Greg Boyd, an appraiser in Hopland, Calif. "The loan officers are ... aggressive, pushy, they talk fast. They know how to put the pressure on."

Ameriquest says it has "tight controls and policies to help ensure accurate property valuations."

Several former loan officers said employees frequently abused the company's "stated income" loan program, which requires only a letter from the borrower declaring how much he or she makes. Borrowers were told what their income had to be to qualify, these ex-workers said, and they were often coached to invent fictitious side jobs, such as home-based computer consulting, to hit the mark.

Nearly one out of every six Ameriquest mortgages sold to Wall Street investors in 2004 was a stated-income loan, according to a Times analysis of 90,000 Ameriquest mortgages listed in filings with the Securities and Exchange Commission.

Many of the ex-employees likened Ameriquest's culture to the rough-and-tumble world of "Boiler Room," a 2000 movie about fast-talking, young stock swindlers who revel in their powers of anything-goes salesmanship.

The comparison is more than happenstance: "That was your homework -- to watch 'Boiler Room,' " Taylor said. Managers and employees passed around the film to keep themselves fired up, she and others explained. Kendall, in a sworn declaration in the Redwood City class-action case, said that watching "Boiler Room" was part of his Ameriquest training.

It was all about "the energy, the impact, the driving, the hustling," Taylor said.

Bomchill, who worked as a loan officer in the Minneapolis suburb of Plymouth in 2002 and 2003, said Ameriquest managers often discouraged questionable practices -- but with a wink: "It was kind of ... see no evil, hear no evil."

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