Glengarry Glen Ross
Mike Hatch takes on Ameriquest
There's a lengthy story in the business section of today's Star Tribune about a lawsuit Minnesota's attorney general has filed against one of the nation's largest subprime lenders--that is, a company that specializes in extended mortgages to people with blemished credit. Because these borrowers often can't qualify for mainstream financiers' best rates--or at least fear they can't--they're often willing to pay very high interest rates or fees. It's one of the fascinating paradoxes of life in this country at this time that this is a terribly lucrative market.
Based on interviews with angry borrowers and former employees, the Strib reports that "Hatch is looking at allegations that Ameriquest falsified the income of loan applicants, used inflated appraisals to overstate the value of homes and changed loan terms before closing." There's some great stuff from former loan officer Troy Huston.
Huston, who worked in the company's Plymouth office in 2002 and 2003 and has been questioned by state investigators, said Ameriquest loan officers routinely falsified loan applications -- inflating the income of applicants, making up occupations for them and sometimes even creating fake letterhead and business cards.
"You would write that Tom Smith owned a construction company making $5,000 a month, when he was really flipping burgers making $2,000 a month," Huston said in an interview. "People were getting loans that in no way, shape or form they could afford."
Huston said the company frequently made "stated income" loans, in which the borrower merely declares his or her income. Originally designed for highly paid professionals whose incomes fluctuate, stated income loans became an easy way for Ameriquest loan officers to push through borrowers with sketchy incomes.
Consumers getting duped by unscrupulous predatory lenders is hardly new, of course. What's so riveting about this chapter is that Ameriquest is hardly a backroom operation; its ads span the television dial and its fliers cram mailboxes in neighborhoods we're accustomed to thinking of as home to consumers banks court. It's grown so fat and sassy on the proceeds of its subprime business it's become, according to the Strib piece, "one of the major players in the home refinancing market, which has surged from $500 billion in 1999 to $1.18 trillion in 2004." In other words, it's become a market force that more traditional creditors are forced to compete with.
Does anybody remember the savings and loan crisis? There's a warranty deed to a tidy teal cubicle here at City Pages ready for transfer to anyone who can say exactly how much U.S. taxpayers are still forking out to cover the costs of that exercise in "irrational exuberance."