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Many people who are losing their homes to foreclosure say they were lied to by the companies that sold them their mortgages. Ameriquest is one of the biggest of those lenders. It was investigated for predatory lending by state prosecutors, and the company now faces a class-action lawsuit from borrowers.
NPR's Chris Arnold talked to former employees of the company who offer a window into the hyper-aggressive practices that allegedly spread through the subprime lending industry during the housing boom.
CHRIS ARNOLD: A few years ago, Ameriquest was a fast-growing lender with 200 branches and thousands of employees calling and convincing people to refinance their homes. It had splashy ads on during the Super Bowl. The founder and owner of Ameriquest, Roland Arnall, became a billionaire. Last year, President Bush appointed him to be ambassador to the Netherlands. But amidst all that came allegations of predatory lending, and even former employees now say the company's fortunes were built on a culture of deception.
Mr. TYSON RUSSUM(ph) (Former Employee, Ameriquest): I didn't really realize that until somebody called up and threatened to come up and shoot us all in the head.
ARNOLD: That's Tyson Russum remembering one particularly upset Ameriquest customer. Russum worked as a loan officer at Ameriquest in Tampa, Florida, during 2003. He'd worked in a mortgage industry before and says right away he could tell there was something unusual about Ameriquest.
Mr. RUSSUM: I think when I showed up for my first day there was three of us that were all new hires that came in together and told us to go into the conference room and watch a couple of videos. Well, the first video they threw in was a movie called "Boiler Room."
(Soundbite of movie "Boiler Room")
Unidentified Man (Actor): You can be whoever you want to be on the phone, you know what I'm saying? I mean, who cares, do what you got to do. Change your last name.
ARNOLD: It's an odd choice for a training video since the movie is about crooked brokers selling stock in bogus companies. Tyson Russum.
Mr. RUSSUM: The impression I got was that they were trying to get across to us that it's basically make the sale at any cost. And that kind of set the, I guess, set the mood for the next 11 to 12 months that I was with the organization.
ARNOLD: Russum says managers encouraged loan officers to conceal the actual cost and interest rates on loans. He says the bulk of these subprime loans that the company was selling adjusted sharply upwards after two years. The payments would then rise by hundreds of dollars a month.
Mr. RUSSUM: Let's say the borrower said to the loan officer, the account executive, I don't like the fact that this is only fixed for two years. And the branch manager would come back to him and say, listen, you need to tell these guys it's fixed for as long as they need it to be.
ARNOLD: Even though, Russum says, that wasn't true. Then Russum says he started seeing things that were even more over the line. Russum says he was honest with customers, but he says many of his co-workers weren't. He says some would white out income numbers on W2s and bank statements and fill in bigger amounts basically to qualify people for loans that they couldn't afford. That was called taking the loan to the art department.
Mr. RUSSUM: You started seeing forging of signatures on loan documentation. You started seeing a lot of bait-and-switch tactics.
ARNOLD: Russum says some loan officers would even print up fake fixed rate loan documents and put them on the top of the stack of papers the customer was signing at their closing.
Mr. RUSSUM: Maybe the first couple of documents they saw in their package were fixed rate, and then they would slip in the adjustable rate docs at the end and then trashing the fixed-rate docs.
ARNOLD: This might sound like a single out-of-control office, but we talked to three other former Ameriquest employees across the country who described many of the same practices in their branches. Mark Bomshow(ph) worked in a branch in Plymouth, Minnesota.
Mr. MARK BOMSHOW (Former Employee, Ameriquest): I feel bad that I was part of this. I feel like I was one of the Enron people who ripped off the little guy. A lot of Ameriquest customers were not educated, they were vulnerable to this kind of deception, they were trusting. And because of that, they lost a lot.
ARNOLD: That's because a couple of years after getting a mortgage with Ameriquest, many customers suddenly can't afford their payments. Dianna Quartelli(ph) says Ameriquest told her that her payments would not go up. She still gets emotional when she talks about getting the letter in the mail that said her payments wouldn't be $849 anymore.
Ms. DIANNA QUARTELLI (Ameriquest Customer): It said now the mortgage was going to go up to $1,200 dollars. And also in that same letter, in six months, it was going to go up again, guaranteed not to go down. Well, we couldn't afford the $849 we were dealing.
ARNOLD: Quartelli has been a dental assistant for 18 years. She has a young daughter. She says with the payment set to rise above $1,800 a month, she knew the family couldn't keep up. So last year, she and her husband sold their house in St. Petersburg, Florida, that they had first bought in 1998.
Ms. QUARTELLI: You know, we were just too far in. The bills were just mounting in. We couldn't do it and we didn't want to be foreclosed on.
ARNOLD: Quartelli says Ameriquest lied to her about a $3,500 pre-payment penalty triggered when she sold her house. Tyson Russum says buyers were told all the time that those fees would be waived, but they wouldn't be and people got stuck paying a fee sometimes upwards of $10,000 dollars just to refinance and get out of a loan. He says that's what that customer was so angry about when he called up threatening to shoot everybody in the head.
Mr. RUSSUM: It was kind of, you know, a tense day. Not knowing whether somebody is going to show up with a gun or not.
ARNOLD: After a year, Russum quit his job. In January of last year, the company settled with 49 states attorneys general who'd started investigating alleged predatory practices at Ameriquest. Chris Orlando is the head of corporate communications for the company. He says Ameriquest did not admit wrongdoing.
Mr. CHRIS ORLANDO (Director, Corporate Communications, Ameriquest Mortgage Company): Ameriquest is a much different company today. Where we found mistakes, we've worked hard to fix them. We've made significant changes that protect consumers.
ARNOLD: With the AG's settlements, Ameriquest set aside $295 million for a customer restitution fund. Lawyers who are still suing the company estimate that their were so many customers affected that most will get less than $1,000, if anything at all. Jill Bowman is one of the class-action attorneys.
Ms. JILL BOWMAN (Attorney, James, Hoyer, Newcomer & Smiljanich): There's going to be a very, I think, substantial group of people that are not protected at all by that settlement, who are not going to even receive the first offer of money out of the settlement.
ARNOLD: Also as part of the settlement, former Mississippi Attorney General Mike Moore was installed as a monitor overseeing Ameriquest's lending practices.
Mr. MIKE MOORE (Former Attorney General, Mississippi): We listened to the calls surreptitiously. You know, they don't know when we are listening.
ARNOLD: Moore thinks the new monitoring is working. He wishes all subprime lenders were being so closely watched. Today, though, Ameriquest's once huge national sales staff has been flashed back to a single, small call center, but there are still a lot of desperate Ameriquest customers.
Two years ago, the company was closing billions of dollars worth of loans. Those mortgages are adjusting sharply up right now and lawyers in the class-action suit say thousands of people could lose their homes. In addition, Moore says there are still plenty of other subprime lenders doing shady things.
Mr. MOORE: People are still being cheated. The terms of the deals are not being made clear to folks. They're going to be paying payments that they cannot afford. And there are going to be billions of dollars in defaults and foreclosures, and somebody needs to do something about this very, very soon.
ARNOLD: Top government officials are right now grappling with how to limit the damage from aggressive subprime lending. Meanwhile, the class action lawsuit is going forward against Ameriquest's parent company, ACC Capital Holdings. That company operates another large subprime mortgage business that sells through independent brokers. The AGs did not alleged predatory lending at that firm. Last year, the parent company originated about $30 billion in loans.
Chris Arnold, NPR News.
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