'Unwitting Victim' Inflated Thousands Of Appraisals

Details are emerging about the Ameriquest settlement. "The settlement between attorneys general in 49 states and Ameriquest, the nation’s largest lender to consumers with less than perfect credit, was announced Monday in Los Angeles. Ameriquest has characterized itself in that case as an unwitting victim of rogue employees who colluded with corrupt appraisers and brokers. A company spokesman said Monday that a restructuring plan..would make appraisal-related fraud more difficult." "Investigators accused Ameriquest of deceptive practices. They included failing to disclose prepayment penalties, misrepresenting the cost of refinanced loans, and causing inflated appraisals from 1999 to 2005, a period of soaring home sales during which the company wrote $106.5 billion in loans." "'The bottom line is that this was a refinancing market in which they were trying to be very aggressive, and they used unscrupulous tactics,' said Missouri Attorney General Jay Nixon." "Federal investigators contend as many as 1,000 Kansas City urban homes were sold with inflated appraisals and forged documents. According to private lawyers, at least 12 class-action lawsuits were pending against the company. The lawyers said they also would inform consumers of their option to sue Ameriquest privately for more money." "One Missouri consumer, Annie Lewis, said she ended up with a loan she couldn’t afford. After she refinanced her Kansas City home through Ameriquest, she said she was shocked to learn her interest payment increased from $645 a month to $820 a month. She later learned from other lenders that 'my property was overappraised.'" "The settlement between the mega-lender and the attorneys general of 48 states, including Massachusetts, halted the investigation into the company's fraudulent lending practices. The investigation found that salesmen for the privately held Ameriquest were encouraged to engage in practices including concealing interest rate and loan costs during the loan processing period, and pressured appraisers to inflate the value of borrowers' homes." "A Whitman resident complained that Ameriquest inflated the value of her house to get her family to borrow more money. Ameriquest then wrote her a high-interest, adjustable rate mortgage, but promised that she could refinance again and get a fixed rate loan within six months. Ameriquest later reneged on that promise, forcing the woman to pay a $6,000 pre-payment penalty when she opted out of the loan." "Lawyers handling private lawsuits against the company criticized the settlement funds as inadequate. Many Ameriquest customers have lost their homes in foreclosure, including many working people of modest means who live in Lowell, Lawrence, and the Plymouth area. Loan fees often amounted to $10,000 or more." "'Many of the affected homeowners paid tens of thousands of dollars in fees and higher interest rates than they should've had to pay, and under the settlement they'll only get a small portion of that back,' Boston lawyer Gary Klein said. Klein said many Ameriquest customers now face the decision of whether to accept the attorney generals' proposed settlement or wait for possibly greater financial relief from class-action suits that have been filed around the country against Ameriquest." "'They'll give up their rights' to participate in the suits, he said, 'if they take money in the AG settlement.'" UPDATE: "Iowa Attorney General Tom Miller led a group of state Attorneys General and financial regulators who brokered the agreement. Miller says they found a variety of problems in the tactics used by Ameriquest. Miller says one of the things the company did was to try and 'up-sell' the loan, or sell them a loan for a higher interest rate and or higher charges than the person had been approved based on their credit history. Miller says the salespeople were given incentives for 'up-selling.'" "He says the more the company overcharged the consumer, the more the salesperson got paid. Miller says there was also a culture of 'doing whatever it takes to sell, sell, sell, and that created a lot of violations.' Miller says there were also a variety of problems with the appraisals used by Ameriquest. Millers says homes were appraised higher, in some cases much higher than they were worth to accomplish the loan. He says the company also made up income when the customer didn't have enough income to justify the loan."