Ameriquest Mortgage Co.'s agreement last week to pay $325 million and reform its operations could turn out to be the first in a series of regulatory actions targeting mortgage companies specializing in credit-strapped borrowers.
State financial regulators are working jointly on other cases involving so-called sub-prime lenders, said Chuck Cross, director of consumer services for Washington state's Department of Financial Institutions.
"We're constantly talking about who is next," said Cross, a leading investigator on behalf of 49 states and the District of Columbia in the case against Orange-based Ameriquest.
Sub-prime lenders write mortgages for customers who cannot qualify for traditional "prime" loans, often because they have poor credit or banks don't think they have enough income or home equity.
Federal Trade Commission officials confirmed that they have several open investigations of sub-prime companies but declined to provide details.
Wall Street firm Bear, Stearns & Co. disclosed last month that its loan-servicing unit EMC Mortgage Corp., which collects bills and buys loans from sub-prime lenders, had handed over data and documents to the FTC. In a regulatory filing, Bear Stearns said the FTC was probing "various unnamed sub-prime lenders, loan servicers and loan brokers" for possible violations of consumer protection laws.
John Yanchunis, a Florida attorney who has filed class-action complaints against servicers, has alleged in two federal lawsuits that EMC systematically failed to post mortgage payments accurately, provided inaccurate information to customers and imposed improper charges.
Bear Stearns spokesman Russell Sherman declined to comment.
In announcing the Ameriquest deal last week, Iowa Atty. Gen. Tom Miller said regulators and consumer protection officials had fielded a wave of complaints over the last five years about sub-prime lenders such as Ameriquest and Household International Inc. Household, now HSBC Finance Corp., paid a record $484 million and adopted widely praised "best practices" to settle a a nationwide investigation in 2002.
Both lenders were accused of using deceptive sales tactics to hide high rates and fees, and Ameriquest was also accused of falsifying appraisals and applications to qualify borrowers for loans they couldn't afford. Ameriquest acknowledged isolated problems, saying it had fired or disciplined those involved, but denied pervasive wrongdoing.
