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Lender would pay $12m in Mass.

Settlement plan follows allegations of high fees

Massachusetts customers of Ameriquest Mortgage Co. would receive $12.2 million under a nationwide settlement after charges that the mortgage company had collected excessive fees and interest rates on improper loans that homeowners often could not afford to repay, a state official said yesterday.

Officials from Massachusetts and 48 other states plan to announce today the details of the $325 million settlement with Ameriquest, its parent company, and two affiliated companies. The settlement, if approved by the courts, would provide about $813 in restitution, on average, for each of about 15,000 residents of the state who got Ameriquest mortgages during the past six years.

Massachusetts' share of the settlement is the seventh-largest among the 49 states and the District of Columbia. Virginia, where Ameriquest does not operate, was excluded. If approved, the award would be second only to a $484 million settlement involving unfair mortgage practices ageed to by Household International in 2002.

Lawyers handling private lawsuits against the company criticized the settlement funds as inadequate. The companies involved in the settlement specialize in loans to middle-class and working-class borrowers with poor credit ratings who would not qualify for a traditional mortgage. While it is a common practice to charge more for these loans, the states alleged that Ameriquest's interest rates and fees were excessive.

''A pattern of consumer deception and fraud ends right here with this settlement," Massachusetts Attorney General Thomas F. Reilly said.

Reilly issued his comment in a statement released by his office. ''With this settlement, approximately $12 million will be returned to Massachusetts consumers who were cheated by Ameriquest," the statement said.

In a statement, California-based Ameriquest yesterday called the agreement ''good for consumers and good for the company," which hammered out details of the settlement with state attorneys general in recent months. ''These improved business practices will enhance our ability to serve our customers," the company said.

Ameriquest is a national lender that aggressively markets its mortgages on television, in mailings, and at sporting events.

At the Rolling Stones concerts in Boston two weekends ago, the company floated a blimp-shaped balloon that circled the interior of the TD Banknorth Garden before the performance.

The companies participating in the settlement are: Ameriquest, Town & Country Credit Corp., AMC Mortgage Services Inc., and their parent company, ACC Capital.

Ameriquest's ties extend into the Bush administration and into the race for governor of Massachusetts.

Its founder, Roland Arnall, appointed Deval L. Patrick, a former assistant US attorney for civil rights, to the board of ACC Capital in 2004. Last year, Patrick, now a Democratic candidate for governor of Massachusetts, supported Arnall's nomination by the Bush administration to become US ambassador to the Netherlands.

The settlement may help pave the way for Arnall's appointment; his final confirmation was held up last fall by Democrats concerned about the allegations against Ameriquest.

Reilly, who is an opponent of Patrick in the race for Massachusetts governor, was among the attorneys general most involved in negotiating the settlement with the mortgage company.

Patrick lauded the settlement in a statement as ''very, very good for consumers in Massachusetts" and nationwide, and he credited Reilly and other state officials ''for working together to reach such a constructive conclusion."

''I am proud to be a part of it and hope that this will be a model for reform that raises standards for lending practices not only at Ameriquest but in the entire industry," he said.

A Boston lawyer, Gary Klein, is representing Ameriquest customers in private class-action lawsuits claiming so-called ''predatory lending" practices.

Klein criticized the settlement as inadequate to cover losses incurred after customers had signed the mortgage documents. Many Ameriquest customers have lost their homes in foreclosure, including many working people of modest means who live in Lowell, Lawrence, and the Plymouth area. Loan fees often amounted to $10,000 or more.

''Many of the affected homeowners paid tens of thousands of dollars in fees and higher interest rates than they should've had to pay, and under the settlement they'll only get a small portion of that back," he said. Klein, a partner with Roddy, Klein & Ryan, said many Ameriquest customers now face the decision of whether to accept the attorney generals' proposed settlement or wait for possibly greater financial relief from class-action suits that have been filed around the country against Ameriquest.

''They'll give up their rights" to participate in the suits, he said, ''if they take money in the AG settlement."

Three individuals who have reviewed the settlement document, and who spoke on the condition of anonymity, said the agreement would place curbs on the company's lending practices -- for example, requiring verbal disclosure of loan terms to customers.

Among the practices being investigated were claims that the company's loan officers did not explain that low introductory interest rates would rise in the future and push up borrowers' monthly payments. Many borrowers said they were thrown into foreclosure because they could not meet the higher monthly payments.

They also detailed other terms of the settlement:

It would require loan officers to follow a script when reviewing mortgage details with Ameriquest customers to ensure that pertinent information is relayed and that customers are better informed. Under the settlement, the lender also agreed to provide loan documents, including material changes in loan terms, to customers three days prior to closing.

It would eliminate incentives that state regulators said encouraged Ameriquest employees to make loans with high fees or closing costs. Last year, the company made some changes to its commission program, but the settlement would also prohibit regional managers in Ameriquest's offices around the country from offering additional incentives that might also encourage loan officers to make improper loans. Commissions may also be reduced if a lending officer engages in deceptive loan practices.

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