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 subprime mortgage companies, the Los Angeles Times reported Tuesday.
On Jan. 23, the parent company of Ameriquest Mortgage Co. announced a $325 million settlement of allegations that it deceived borrowers, falsified loan documents and pressured appraisers to overstate home values.
A task force of 49 states and the District of Columbia investigated the Orange County, Calif.-based company and two affiliates — all specialists in higher-cost mortgages to borrowers unable to qualify for bank loans. The company agreed to overhaul its lending practices without admitting wrongdoing.
Now, similar investigations are underway by state regulators targeting other subprime lenders, Chuck Cross, director of consumer services for Washington state’s Department of Financial Institutions, told the Times.
“We’re constantly talking about who is next,” said Cross, according to reports. Cross was a leading investigator on behalf of 49 states and the District of Columbia in the case against Orange, Calif.-based Ameriquest.
Though there is some disagreement as to the meaning of the term, generally, subprime lenders are those who write mortgages for customers who can’t qualify for traditional “prime” loans, often because they have poor credit histories.
Federal Trade Commission officials confirmed that they have several open investigations of subprime companies but declined to provide details to the Times.
Wall Street firm Bear, Stearns & Co. disclosed last month that its loan-servicing unit EMC Mortgage Corp., which collects bills and buys loans from subprime lenders, had handed over data and documents to the FTC, the Times said.
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, the Times said.
Bear Stearns spokesman Russell Sherman declined to comment to the Times.
Sub-prime lending has grown to one-quarter of the mortgage market in recent years, according to the Mortgage Bankers Association, though the industry is experiencing a slowdown.
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