Md. notifies borrowers in Ameriquest settlement

12,340 customers in state are eligible for restitution of several hundred dollars

Marylanders who got home loans from Ameriquest Mortgage Co. can begin to claim their share of a $325 million settlement reached with the subprime lender that was accused of preying upon borrowers nationwide with deceptive practices.

Douglas F. Gansler, Maryland's attorney general, announced yesterday that his agency and the Maryland commissioner of financial regulation sent letters and claim forms this week to 12,340 Ameriquest customers in Maryland who are eligible for $7.8 million in restitution.

Depending on how they were harmed, borrowers could receive hundreds, and in some cases thousands, of dollars.

Ameriquest, a subsidiary of ACC Capital Holdings in Orange, Calif., agreed in January 2006 to settle the case brought by 49 states, including Maryland, after a two-year investigation. Under the agreement, the company has been paying into a settlement fund in installments.

"It's a very, very large amount of money, so we allowed them to pay quarterly, rather than come up with the entire amount all at once," said V. Scott Bailey, a Maryland assistant attorney general. "That would have put them out of business, and in that case it would have been questionable how much we could have collected for consumers."

Regulators said the lender, which consented to changing its lending practices but didn't admit any wrongdoing, misrepresented the terms of home loans, such as whether it carried a fixed or an adjustable rate.

The lender and its affiliates also charged excessive loan origination fees and prepayment penalties; refinanced borrowers into inappropriate loans, and inflated appraisals used to qualify borrowers for loans, regulators said. Ameriquest has been retrenching along with the subprime industry, which has been roiled by losses from rising foreclosures. Subprime loans are made to borrowers with bad credit histories or heavy debt.

The mortgages often charge higher interest rates to compensate for the greater risk of default.

Dozens of subprime mortgage companies have declared bankruptcy, shuttered operations or been sold in recent months. Ameriquest, which was one of the largest, closed more than 200 branch offices last year and consolidated operations into four call centers.This year the company moved those operations into one call center in Orange, spokesman Chris Orlando said.

The National Association for the Advancement of Colored People sued Ameriquest and other lenders this week. The civil rights group alleges that the lenders discriminated against black borrowers by steering them into higher-interest subprime loans while giving more favorable loan terms to whites.

As for the multistate settlement, Orlando called the restitution "an important final step." The settlement covers customers of Ameriquest, Town and Country Credit Corp., and AMC Mortgage Services, formerly known as Bedford Home Loans, from January 1999 through December 2005.

Consumers owed restitution will be paid out under two tiers depending on how they were allegedly deceived. One will pay out an average of $756; the other an average of $569.

The forms mailed to eligible borrowers indicate a minimum payment they can expect to receive, though that figure could grow if fewer borrowers decide to take part in the settlement.

Consumers who do opt for the settlement give up their right to sue Ameriquest over the loans that are covered; they would not be giving up any claim they could otherwise raise if their homes go into foreclosure.

Gansler's office encouraged consumers to consult a private attorney or seek subsidized legal services. They must mail competed and signed forms to the settlement administrator by Sept. 10. (baltimoresun.com)