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Class Action Settlements: Ameriquest

Ameriquest was once the nation’s largest subprime mortgage lender, having made over $50 billion in subprime loans in 2004. The company had been founded in 1979 in Orange County, California, as a bank, but converted to performing only mortgage lending in 1994. On January 27, 2010, it agreed to settle 29 class action lawsuits filed against it for about $22 million for alleged predatory lending practices.

In 1996, the company had been investigated and sued by the Justice Department for gouging mostly older female and minority borrowers and agreed to pay $3 million to establish a fund to educate its lenders in proper lending practices.

A dispute with ACORN, a collection of community organizations for low and middle income families, was settled in 2001 after intervention by the Federal Trade Commission wherein Ameriquest agreed to offer $360 million in low-cost loans.

By 2005, Ameriquest was already settling suits in numerous states for millions of dollars based on allegations it had preyed on borrowers by charging them hidden fees up to 12 percent of the value of their mortgages, and by disguising or failing to disclose balloon payments that would ultimately result in numerous bankruptcies and short sales. Their actions have been considered to have contributed to the eventual crash of the subprime mortgage practice.

Ameriquest agreed to close its lending offices in 2006 and on August 31, 2007, its loan servicing unit was sold to Citigroup.

Former employees of Ameriquest disclosed that they were pressured by management to falsify documents on mortgages with little chance to succeed, and then sold the mortgage packages to Wall Street banks for quick profits on both ends.

Although the terms of the settlement of the 29 class action suits were kept secret, Ameriquest promised to pay the $22 million to 712,000 borrowers. After deducting for attorneys fees and administrative costs, the average claimant could expect no more than $20, although with a typical response of about 20 percent of potential claimants actually filing a claim, this amount could rise to as much as $100 per average claim.