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Ameriquest Loan Volume Plunges
The 46% first-quarter drop
set the stage for deep job cuts
announced by the lender this week.
By E. Scott Reckard, Times Staff Writer
May 6, 2006
Ameriquest Mortgage Co.'s decision
to close all 229 of its retail branches
and eliminate 3,800 jobs
follows a steep decline
in its lending volume
and attempts to find a buyer,
according to analysts
who follow the home-loan business.
The Orange-based lender said Friday
that it was not for sale.
But it has been squeezed hard
by rising interest rates
and bitter competition
. Ameriquest officials
said loan volume plunged 46%
to $2.6 billion in the first quarter
from $4.8 billion a year earlier.
What's more,
it spent last year
dealing with government investigations
of alleged predatory lending practices
at some of its branches.
In January, it settled
with 49 states by agreeing to pay
$325 million and reform its procedures
to protect consumers.
The reforms, including the hiring
of an outside firm to monitor compliance
with the agreement,
"adversely impacted the cost structure,
thus reducing retail branch profitability,"
Privately held Ameriquest
is a specialist in the so-called
subprime market for people with credit problems
or other issues that prevent them
from obtaining lower-cost loans.
Almost all its loans are
refinancings of existing debt.
With interest rates rising,
fewer people are looking to refinance
— triggering a wave of layoffs
in the industry and leading to predictions
that weaker lenders would be acquired or shut down.
Competitors such as Saxon Mortgage
in Glen Allen, Va.,
and ECC Capital Corp.
in Irvine have closed retail offices
to save money
Talk of an Ameriquest sale
surfaced in October,
At an industry conference that month,
representatives of two investment firms
had a "book" on Ameriquest
for potential buyers to review.
the company says " we're not for sale,
and haven't been for sale."
Ameriquest is a division
of ACC Capital Holdings Corp.,
which also owns Argent Mortgage Co.
and Town & Country Credit Corp.
ACC's founder and owner,
Roland E. Arnall,
removed himself from the company's management
last year to accept
a presidential appointment as U.S. ambassador
to the Netherlands.
His wife, Dawn Arnall, now serves as chairman.
There are concerns about Ameriquest's reputation
after the investigation by the states
and a drumbeat of negative news stories.
"I don't think it's going to happen unless it's a bargain basement price,"
"Who the heck wants to take on that image?
I think it's a poison name right now."
.
Complaints that Ameriquest employees
deceived borrowers about expensive loan terms
and falsified documents to get people
into mortgages they couldn't afford
were the topic of a series
of Times articles beginning
in February of last year.
That month, Ameriquest disclosed
it was under investigation
by a multistate task force.
According to National Mortgage News,
Ameriquest Mortgage
and its sister companies together
were the No. 1 subprime lender
in the first quarter of last year
, originating $24.4 billion in loans.
Irvine-based New Century Financial Corp.
was a distant second,
with $10.2 billion for the quarter.
By the end of the year, however,
Ameriquest's fortunes had declined.
In the fourth quarter,
Arnall's companies made $15 billion in loans,
while New Century originated $15.7 billion
and Wells Fargo & Co.'s subprime operations
lent $17.7 billion,
the trade publication reported.
The 3,800 job cuts announced Tuesday
, from a staff of 11,000 people
, did not include reductions
at Ameriquest Mortgage's biggest sister company,
Argent, which makes its loans
through independent brokers
rather than directly to consumers.
In addition to employees at Ameriquest's branches,
about 400 at the company's headquarters
were handed pink slips.
"Consumer behavior is really moving away
from customers walking into a retail business to purchase a mortgage face to face," he said.
Consumers' use of the so-called direct mortgage channel
— getting a loan via the phone and the Web
rather than from a broker or loan agent
— indeed appears to be growing,
though it is unclear exactly how much.
A Mortgage Bankers Assn. survey
showed that the direct channel
accounted for 8% of all subprime loans in 2001,
9% in 2002,
and 12% in 2003 before falling to 9% in 2004
and 7% in 2005,
an economist with the association.
Brinkman noted that the two-year
decline occurred as do-not-call
lists reduced the ability
of businesses to cold-call consumers.
Posted by the baron at May 6, 2006 07:29 PM
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