Ameriquest Mortgages: Risky Business, Risky Practices

Ameriquest calls itself the “Proud Sponsor of the American Dream,” but Mark Bomchill remembers his one-year stint processing loans at a branch outside Minneapolis as a nightmare.

Before joining Ameriquest Mortgage Co., Bomchill worked for Household Finance Co. There, he’d typically process two or three applications for home loans each month.

After he moved to his new job in suburban Plymouth, Minn., Bomchill was taken aback. Sure, annual interest rates for a 30-year fixed mortgage were below 5 percent, a 40-year low, so demand for new loans was high. But the demands to produce new business were even higher, Bomchill thought.

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“It was so out of hand, I was juggling 10 to 15 new loans every month,” says Bomchill, who now works as a loan consultant at Plymouth, Minn.-based Allstate Residential Mortgage. “And there were guys in my office doing two or three times as many as I was. No one ever thought to question whether [the loan] was right for the customer or for the lender. It was just do the deal and move on to the next.”

Even though he and others in his office were closing more than 80 new loans every month, it wasn’t enough to satiate upper management. “Every day my boss would scream and yell at us to make more calls, solicit more suckers,” he says. “He was a tyrant. It never ended.”

In the aftermath of the Internet-stock collapse and the Sept. 11 terrorist attacks, real estate became the go-to investment on Wall Street and Main Street.

But as the Federal Reserve Board continues to ratchet up interest rates and more and more buyers opt for high-risk, adjustable-rate mortgages, this safety net of the American economy in the past four years may not be that safe after all.

No mortgage loan gets made without a processor, and the processor’s job is only as safe as the number of loans he or she can make in a month or a quarter. In theory, the software used to process and track each loan should be able to guide the processor through each loan’s creation and immediately reject those borrowers who can’t legitimately qualify for a loan.

But software is only as good as the people using it. And in the case of Ameriquest, safeguards appear to have been bypassed by an overriding desire to drive up volume of loans—even if it meant lending to less creditworthy customers who might lose their homes in the end.

Ameriquest has been paying the price, in court cases that have already cost it more than $100 million. And company officials have set aside another $325 million to settle other lawsuits on the horizon.

Story Guide:

  • Ameriquest Home Loans: Cracking Under Pressure: Even in a fertile market, it’s possible to set your sales goals too high.
  • Loan Rangers: Ameriquest became unusually successful digging up loan candidates others may have overlooked.
  • Settling Up: Ameriquest’s hard-sell tactics worked but, say investigators, violated a series of consumer-protection laws.
  • Riding the Sub-Prime Wave: As the house market heated up, borrowers stretched themselves to foreclosure-threatening lengths; and lenders helped them.
  • No-Touch Funding: Believing in your applicants can go too far, and get you both in trouble.
  • Who’s to Say: Automation was supposed to make loan approvals faster, easier and more accurate; did the system fail, or did the officers handling the loans?
  • Tighter Controls: Making requirements stiffer only works if enforcement gets tighter as well.
  • Penalties for Abuse: Ameriquest denies wrongdoing, relies on IT for process improvements, and may face penalties in the hundreds of millions from class-action suits.
  • Avoiding the New Restrictions: It’s one thing to let borrowers overextend themselves; it’s something else to deceive them into doing it.
  • Ameriquest’s Business, By the Numbers

    Next page: Loan rangers.

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