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Ameriquest Settlement: Who's At Fault For Mortgage Meltdown?

Friday, 13 Jul 2007 | 10:18 AM ET
Ameriquest Mortgage Company
CNBC.com
Ameriquest Mortgage Company

We do an awful lot of talking about how the real estate boom was fuelled by all those aggressive loans that many Americans claim they just plain didn’t understand. Well how about a little justice on this Friday the 13th?

Many homeownerswill begin receiving restitution claims next week from their attorneys general, all part of the $325 million settlement deal with Ameriquest Mortgage Corp. Massachusetts Attorney General Martha Coakley says Ameriquest and its related companies (Town and Country Credit Corp. and AMC Mortgage Services, Inc.) will pay approximately 20,000 Massachusetts consumers $13,752,700. California Attorney General Edmund G. Brown Jr, says Ameriquest will pay 78,000 Californians, who were “targets of improper sales practice,” $51 million.

The settlement, which was reached last year, resolves allegations by the attorneys general and banking and finance regulators of the District of Columbia and every state except Virginia (Ameriquest didn’t do business there). The allegations were that the lender and its affiliates “misrepresented and did not adequately disclose the terms of home loans, such as whether a loan carried a fixed or an adjustable rate; charged excessive loan origination fees and prepayment penalties; refinanced borrowers into improper or inappropriate loans; and improperly inflated appraisals used to qualify borrowers for loans.”

That bit in quotes basically sums up the housing fiasco that will define residential real estate for the first decade of this century: Aggressive lenders coupled with uninformed borrowers who were so jacked with the idea of making a quick buck on a condo or getting themselves into a home they probably knew deep down they couldn’t afford made for a toxic mix.

I have to admit, I have a problem with one part of this settlement, specifically that part: “did not adequately disclose the terms of home loans, such as whether a loan carried a fixed or an adjustable rate.” It’s the word “disclose” specifically. If Ameriquest outright lied in the paperwork, saying in print that it was a fixed-rate loan when it really wasn’t, then fine, the borrowers were duly duped and should be paid. But if Ameriquest agents simply didn’t mention what type of loan it was, and the borrowers didn’t pay enough attention to ask, to be as aggressive in understand their loans as the lenders were in pushing them, then I’m not sure whom is more to blame.

I’ve been saying it over and over again. I know that aggressive and often predatory lending was the hallmark of the latest housing boom, but borrowers who went in with their eyes open to that great big house and closed to the real terms of their loans, are just as much to blame as the lenders.

Questions? Comments? RealtyCheck@cnbc.com

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  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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