Washington State

Office of the Attorney General

Attorney General

Bob Ferguson


Washington agencies continue working to address the subprime meltdown

OLYMPIA – December will be a bit more rewarding for 8,750 Washington residents. They’ll receive checks this month totaling nearly $9.9 million as part of a national settlement with former subprime lending giant Ameriquest.

Attorney General Rob McKenna and Scott Jarvis, director of the Department of Financial Institutions (DFI), announced today that the checks are in the mail from the settlement administrator and should arrive at homes within a week. Consumers will receive payments as little as $47 to as much as $7,950, depending on when they applied for a loan and individual circumstances. The average check is $1,130.

The money comes from last year’s $325 million national settlement, in which states alleged widespread fraud by Ameriquest as part of a high-pressure scheme to sell mortgages that trapped consumers into debt and put them at risk of losing their homes.

“We’re glad to be able to put money back into the pockets of families whose American dream of homeownership became a nightmare,” McKenna said. “The Ameriquest settlement continues to serve as a serious warning to the subprime mortgage industry that we won’t tolerate predatory lending.”

The Ameriquest settlement ranks as the second-largest government consumer protection settlement in history. The states alleged that Ameriquest deceived consumers, inflated home appraisals, and fabricated employment and income information in order to make the largest possible profit. Consumers were tied into loan balances significantly higher than the true value of their homes, which ultimately blocked them from refinancing with other lenders or selling without taking a substantial loss.

“Many Ameriquest victims were already homeowners who thought they’d save money by refinancing but instead were trapped into mortgages they couldn’t repay,” McKenna said.

“DFI continues in its efforts to educate and protect Washington consumers so they are less likely to become victims of predatory lending practices,” Jarvis said. “If and when consumers do fall victim to unethical and/or illegal practices, we are here to ensure perpetrators are held accountable. This settlement is just one example of our commitment to helping Washington families and carrying out the DFI mission of protecting the public, promoting economic vitality and preserving integrity in the marketplace.”

Nationwide, 64 percent of the borrowers who were eligible for restitution agreed to participate in the settlement by filling out refund request forms prior to the Sept. 10 deadline. Washington’s participation was slightly higher. A little more than 70 percent of the 12,369 Washington residents who were eligible for restitution will receive checks – and they will receive larger payments than borrowers in other states.

The payments are higher because Washington received more money for legal costs as a result of its leadership role in the investigation and settlement negotiations. The Attorney General’s Office and DFI agreed to add more than $2 million of those funds to the restitution pool in order to provide larger payments to consumers.

Among other things, the states’ settlement required Ameriquest to provide full disclosure regarding interest rates, discount points, prepayment penalties, and other loan or refinancing terms. The company must also ensure that every loan benefited borrowers, not only Ameriquest and its commissioned employees.

ACC Capital Holdings, Ameriquest’s parent company, announced on Aug. 31, 2007, that it was closing Ameriquest, no longer taking retail loan applications. At the same time, it sold Argent, its wholesale loan servicing unit, to Citigroup.
Washington agencies are now turning their attention to dealing with an anticipated increase in foreclosures as borrowers with adjustable rate mortgages see significant increases in their loan payments amid declining property values. Among their efforts:

  • In July, DFI announced it would adopt a statement of regulatory guidance standards on subprime lending in an effort to more effectively protect Washington consumers.
  • DFI conducted a statewide, bilingual advertising campaign in an effort to inform Washington homeowners of the need to understand their mortgage requirements and to work with lenders to avoid foreclosure.
  • The Attorney General’s Office is requesting legislation this session to reduce foreclosure rescue schemes that include an option to buy or lease back the property. In this time of rising mortgage rates, desperate homeowners have been lured by offers of assistance – only to be cheated out of equity they’ve built up and tricked into transferring ownership of their home. This important bill would require a written contract with clearly disclosed terms be completed by the homeowner and the purchaser prior to the property’s transfer. It would also require that the homeowner must receive at least 82 percent of the difference between the property’s fair market value and the underlying mortgage in the event of a sale to a third party.
  • In June, the Attorney General’s Office convened a think tank with the Washington Bar and Northwest Justice Project to look at issues around mortgage problems and fraud. The think tank brought together representatives from government agencies and nonprofit organizations, private attorneys and industry professionals. From this, organizers formed work groups to further explore ways to reduce the rate of foreclosure in Washington, help consumers who face the loss of their homes and crack down on fraud.
  • In September, Governor Chris Gregoire formed a Task Force for Homeowner Security. The group is evaluating instability in the national subprime mortgage market and will soon make recommendations to minimize the impact of this national trend in Washington. Jarvis is a member of the task force and the Attorney General’s Office supports the task force’s work.
  • DFI continues to offer consumer education to ensure Washington residents understand their rights and make informed decisions about home loans. The agency offers consumers a Guide to Home Loans online, in booklet format and on CD-ROM. To order a booklet or CD, call (360) 902-8700 or (877) 746-4334.

CONSUMER INFORMATION: Detailed information about the Ameriquest settlement and restitution is available at www.ameriquestmultistatesettlement.com. Consumers also may contact the settlement administrator at 1-800-420-5875. (Hearing-impaired persons may call 866-494-8274.)

AMERIQUEST CASE HISTORY: Information about the Ameriquest settlement and court documents are available here.

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MEDIA CONTACTS:    Kristin Alexander, Media Relations Manager, Washington State Attorney General's Office, (206) 464-6432
David Huey, Assistant Attorney General, (253) 593-5057
James Brusselback, Enforcement & Complaints Program Manager, DFI, (360) 902-0511
 Lyn Peters, Director of Communications, DFI, (360) 902-8731