Ameriquest did not admit to any wrong doing in the settlement. Charges against the company included ?up-selling? high-priced loans to borrowers with good credit, inflating appraisals and falsifying documents, and unethical and illegal business practices.
You're probably asking yourself, what does this mean for mortgage brokers? During the press conference announcing the settlement, the state Attorney Generals were asked if the investigation included any review of Ameriquest's wholesale division, Argent, and if they were aware of illegal activities by mortgage brokers. Their response was that it did not include a review of the wholesale side of lending, but that they are aware of this side of the market and they are looking to review that segment of the industry in the near future. With that harbinger in mind, the CAMB Government Affairs Team reviewed the settlement to see what some of the more relevant practices that were investigated in the Ameriquest settlement that could potentially happen with mortgage brokers.
Inflating AppraisalsIt was discovered that Ameriquest sales personnel were colluding with their hand picked appraisers to inflate the prices of homes to put borrowers in larger loans. It was suggested that sales personnel were pressuring appraisers to hit certain home value targets. They used many tactics including delays in payment or the use of a second appraisal as a means to pressure appraisers.
As part of the settlement, Ameriquest agreed to put procedural safeguards in place to ensure accurate appraisals. Sales personnel will no longer select an appraiser. They will be assigned an independent one through a centralized process that is separate from the branch sales office. No communication as to the expected value of the property will be allowed. Complete copies of the appraisal must be given to the borrower and the appraiser must be paid in a timely manner regardless as to whether or not the loan actually closes. If the appraisal is believe to be professionally deficient a second appraisal may be ordered but all records must be kept for audits and company must audit 20% of all appraisals as part of internal quality -disclosure of loan program and feesThe state Attorney Generals contended that sales personnel were often not disclosing fees, loan program types, and often would promise lower interest rates or certain loan programs and did not deliver on those statements. Also, sales personnel encouraged borrowers to ignore disclosure documents that contradicted what the sales personnel were telling them. To address this issue, Ameriquest drafted specific text which must be recited to the borrower for the following loans: fixed rate mortgages with discount points, fixed rate mortgages with specific loan terms, adjustable rate mortgage with specific loan terms, adjustable rate mortgage with discount points, prepayment penalty, concluding statement, interest rate disclosure. Also, all written disclosures must be provided within three days of obtaining the loan pricing information.
Non-disclosure of prepayment penalties and refinancing
Part of the investigation focused on prepayment penalties. According to the state Attorney Generals, prepayment penalties were often not disclosed to the potential borrowers and that the company provided financial incentives to sales personnel to include prepayment penalties in loans. This practice coupled with an aggressive refinancing program that solicited borrowers in a short period of time after their loan resulted in many homeowners losing significant equity in their home.Under the settlement, the practice of providing employees monetary incentive or other compensation for including such penalties in a loan is prohibited. Also, if any prepayment penalties are not timely or fully disclosed, the company must reimburse the customer for any penalties paid. Ameriquest also agreed to not solicit borrowers within 24 months of closing, except in certain instances.
Unethical Business Practices
The most pervasive company practice that the state Attorney Generals targeted was the policy of ?up-selling? where sales personnel were provided financially incentives to increase the fees and rate of the loan. Also, sales personnel were encouraged to inflate or fabricate the borrower's amount or source of income on stated income loans. Spanish borrowers were often communicated to in Spanish, however there disclosures were often in English. Also, Ameriquest was described as having unreasonable quotas on its sales personnel.
As part of the settlement, Ameriquest must create a pricing model that is designed to produce the same interest rates and number of discount points for all borrowers. Also, Ameriquest cannot have any incentive programs in place that encourage sales personnel to increase the costs or rate of a loan. Ameriquest must also provide Spanish-speaking borrowers with Spanish speaking employees and Spanish documents.
To ensure compliance, outside monitors will observe the company's operations to ensure that it operates in accordance with the agreement.
When the state Attorney Generals were asked what this settlement should mean to the rest of the industry, they quickly responded saying that while many of the practices, like up selling or providing incentives to increase loan costs were not technically illegal, they create an environment where illegal practices might happen. And, in their future investigations, they will look for these practices as an indication of illegal activities despite the practices themselves not being illegal.
CAMB encourages mortgage brokerages to examine the business practices of Ameriquest and see the procedures and changes they have been forced to make to meet the test set out by the Attorney Generals to be an ethical and honest business. In the future, be prepared for the Attorney Generals to start examining the business practices of wholesale lending channels and how mortgage brokers conduct business with wholesale lenders.
0 komentarze:
Post a Comment