Sleazy Mortgage Lenders

Sleazy mortgage lenders lobbied their way out of increasing legal restrictions on high-risk subprime home loans. The biggest sleazes were Ameriquest Mortgage and their subsidiaries, who just settled a class action lawsuit in New York to the tune of over $325 million. The agreement requires Ameriquest to pay $295 million restitution to states divided into two separate funds: a $175 million fund to be distributed under a nationwide formula to most consumers who received an Ameriquest loan between Jan. 1, 1999 and April 1, 2003; and a $120 million fund to be divided among the states based on the volume of Ameriquest loans made in each state, to be distributed, at each state’­s discretion, to consumers who received an Ameriquest loan between Jan. 1, 1999 and Dec. 31, 2005.

The attorneys general from Iowa, California, Illinois, and Washington joined the New York Attorney General’s office in the investigation of Ameriquest. This multistate effort revealed that Ameriquest used predatory and illegal lending practices to entice home owners into refinancing. Ameriquest’s activities included misrepresenting and failing to disclose loan terms, charging excessive loan origination fees, and inflating appraisals to qualify borrowers for loans. As a result, many of these home owners were facing foreclosure.

New York Governor Eliot Spitzer, said

“As homeowners throughout the state and the country grapple with the fallout from subprime mortgages we must do all we can to soften the blow, the Ameriquest settlement demonstrates why strong state enforcement to combat predatory lending practices is crucial to protecting consumers. The financial relief provided through this settlement will help borrowers defray the price of these costly loans.”

This sentiment was echoed by New York Attorney General Andrew Cuomo:

“Through their aggressive use of deceptive and predatory lending practices, Ameriquest both exploited borrowers and contributed to today’­s staggering crisis in the mortgage industry…” “These funds will help undo the damage that Ameriquest caused to thousands of New Yorkers.

I couldn’t agree more, but let’s not forget that state lawmakers foresaw this crisis and not only failed to prevent it, but in my opinion were culpable in its outcome. State legislators fueled this mess by selling-out to lobbyists instead of protecting their constituency. I hope voters will remember this at the polls.