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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

Three other former workers at the branch said Bomchill's description was accurate.

"I really don't think they have the customers' best interest in mind at all," said Troy Huston, a former colleague of Bomchill's who now works as a broker for Access Home Finance in Bloomington, Minn.

"They really are all about making the dollar and dealing with the consequences later."

Not everyone, though, shares that view. One former employee at the Plymouth branch disputed Bomchill's account of widespread misdeeds. The employee, who asked not to be named, said he believed some appraisals might have been inflated. But overall, he said, "we had a respect for the rules and wanted to do things honestly."

Several of the former employees who were interviewed also stressed that no one at Ameriquest encouraged them to violate laws.

"I truly do believe that nothing illegal was done," said Brock Fegan, a loan officer at Ameriquest's Grand Rapids, Mich., branch in 2004.

Still, Fegan said he was concerned about how Ameriquest targeted "poorly informed customers" and stocked its branches with ill-trained loan officers who "a lot of times don't know what they are doing." As a result, he said, many customers -- including some with excellent credit histories -- end up slammed with high rates and excessive fees.

Ameriquest says its training system "equips our associates with the tools and information they need" to do their jobs properly.

Denouncing Tactics

The allegations against Ameriquest are the latest for the sub-prime industry, which charges higher fees and interest rates to customers who may have missed mortgage payments, run up huge credit card debts or struggled with job losses and bankruptcies.

Many such clients are financially unsophisticated, increasing the chance of their being exploited.

"There is a huge imbalance of power and knowledge between the people making these loans and the borrowers," said Benjamin G. Diehl, a specialist in lending abuse with the California attorney general's office.

Sub-prime lenders made $587 billion in new mortgages last year, up from $390 billion in 2003, according to National Mortgage News. During the first nine months of 2004, Ameriquest's slice of that was about $37 billion, including $16 billion in the third quarter, the trade publication estimated. (The company stopped releasing its lending figures in late 2003.) At that pace, Ameriquest's total for the year was set to exceed $50 billion.

Ameriquest traces its roots to Long Beach Savings & Loan, a thrift headed by Arnall during the 1980s. The bank moved to Orange in 1991 and was converted to a pure mortgage lender in 1994.

In 1996, the company, renamed Long Beach Mortgage Co., paid $4 million to settle a Justice Department lawsuit accusing it of gouging older, female and minority borrowers. Prosecutors accused it of allowing mortgage brokers and its employees to add a fee to these customers of as much as 12% of the loan amount.

The company later reorganized as Ameriquest Capital. Its Ameriquest Mortgage Co. unit makes direct loans to customers, and its Argent Mortgage Co. works with independent brokers.

In the late 1990s, the company's sub-prime lending drew the attention of a national housing advocacy group, Assn. of Community Organizations for Reform Now, or ACORN. The group's president, Maude Hurd, denounced the company as a collection of "slimy mortgage predators." About the same time, the Federal Trade Commission began an investigation into its lending practices.

In July 2000 Ameriquest worked out a cease-fire with ACORN.

The deal included a commitment to make $360 million in low-interest, low-fee loans to customers in the largely minority neighborhoods where ACORN operates. (Ultimately, according to ACORN, Ameriquest made only a small fraction of those loans because the group found other firms offering better terms for community residents. Ameriquest says it continues to work with ACORN on the program.)

Soon after, the FTC called off its investigation. Fair lending advocates, including the National Community Reinvestment Coalition and the Leadership Conference on Civil Rights, hailed Ameriquest as a progressive force in the sub-prime market.

With its regulatory and image problems behind it, Ameriquest embarked on an all-out marketing offensive that now includes an Internet advertising blitz and two blimps that hover over major sporting events.

According to the ex-loan officers interviewed by The Times, however, the company's growth has been generated more by hard-sell tactics than by slick marketing. They described 10- and 12-hour days punctuated by "power hours" -- nonstop cold-calling sessions to lists of prospects burdened with credit card bills; the goal was to persuade these people to roll their debts into new mortgages on their homes.

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