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Mortgage firm settles abusive lending case

WASHINGTON -- Alleged predatory lending to American Indians on reservations
has emerged as a factor in one of the biggest financial institution
settlements in history.

Ameriquest Mortgage Co., based in Orange, Calif., recently settled
allegations of abusive lending with multiple state attorneys general and
other state agencies by agreeing to pay $325 million in restitution to
affected home loan borrowers. It is a unit of ACC Capital Holding Corp.,
also of Orange, and makes "subprime" mortgages to borrowers with
less-than-perfect credit.

Some of those will be American Indians living on their reservations.
National Mortgage News reported the firm disclosed in a Securities and
Exchange Commission filing that one of the lending practices at issue with
the states was "its policies on funding Native American reservation
properties."

No further details on reservation lending practices were immediately
forthcoming, but a check of 2004 Home Mortgage Disclosure Act data shows
that Ameriquest and its affiliate, Argent Mortgage, are big players in home
loan finance for Indians.

The HMDA data, released in the summer of 2005 and sorted by NMN, do not
break down on-reservation lending versus off-reservation.

Ameriquest was a top 20 lender to American Indians in 2004, and Argent (not
named in the investigation) ranks fifth. Together they would comprise the
third-largest mortgage lender to Indians in the country, and their 2004
cumulative total was more than $1 billion.

Ameriquest, a retail lender with physical branch offices, loaned $348
million to American Indians in 2004, its HMDA filing shows. That was the
17th largest in the country. Argent, a "wholesale" lender that does
business with local mortgage brokers, loaned $800 million. Together, the
two units had a Native volume of $1.15 billion, which would put them behind
only Countrywide Home Loans and Wells Fargo Bank, both California-based.

These were huge increases from the firms' 2003 Indian mortgage lending, a
record year overall for mortgage lending in the country. That year, Argent
reported making $94 million in loans to Indians, for 20th place, and
Ameriquest $62 million, placing it 31st, according to HMDA data.

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One factor offsetting the sudden jump was that in 2004, for the first time,
HMDA tallied loans made to those who counted themselves multi-racial,
including Indian. In 2003 and prior years, it measured lending to those who
marked themselves as solely Indian.

Indians both on-reservation and off who had loans made by Ameriquest and
other affiliates called Town and Country Credit Corp. and AMC Mortgage
Services (formerly Bedford Home Loans) between January 1999 and December
2005 are eligible for restitution.

Under the settlement, $30 million will go towards legal fees and $295
million to the affected borrowers in 49 states (Ameriquest does not lend in
Virginia) and the District of Columbia. Borrowers accepting the terms of
the settlement will be paid as a matter of course and do not have to get
contact anyone; those who do not can retain their own attorneys if they
want to proceed against the company.

For borrowers who got loans between 1999 and April 1, 2003, $175 million
has been earmarked; and $120 million for loans made between 1999 and Dec.
31, 2005.

Several years ago, the National American Indian Housing Council identified
predatory lending as a big problem among the Indian housing providers it
surveyed. A large percentage reported that members of their tribes had
suffered predatory lending and been charged up to 25 percent in interest on
their loans. Private mortgages currently average 6.1 percent.

The office of the Pennsylvania attorney general, one of the settling
states, said the settlement was the second-largest federal consumer
protection settlement in history.

The Pennsylvania attorney general noted that Ameriquest did not admit any
wrongdoing but had agreed to amend what the states said were "unfair and
deceptive practices." The office noted that Ameriquest has already
implemented some of the 11 changes it has promised to have in place by
March 2007.

It said investigators found that "Ameriquest employees deceived thousands
of consumers by using high pressure tactics to boost their monthly quotas
and commissions." And it said the company engaged "in unfair and deceptive
lending practices by misrepresenting the actual amount of interest,
inflating their home appraisals, delaying funding of consumers' loans after
closing and failing to clearly disclose fees or penalties associated with
paying the loans off ahead of schedule."