Inner City Press Report - February 4, 2006

Predatory Super Bowl: Ameriquest and the Big Banks in Detroit

Fair Finance Watch from Inner City Press

            The national media’s Super Bowl week in Detroit has given rise to contradictory stories praising and critiquing the city, calling it rebuilt or still in decline. "Some of the people kind of had those written before they got here," said Mayor Kwame Kilpatrick (fresh from cutting back the city’s fire department). Detroit’s population has declined from two million in 1954 to under a million today. It’s been noted that 1000 residents still leave every month, but now there’s a ubiquitous Hard Rock Café.

      Wanting to look at the lending that’s under this surface, Inner City Press / Fair Finance Watch has analyzed mortgage lending patterns in the Detroit Metropolitan Statistical Area in the most recent year for which data is available, 2004. Comparing the rate at which African Americans and whites were confined to higher cost mortgages over the federally-defined rate spread (of 3% over comparable Treasury securities on first lien loans, 5% on subordinate liens), some of the biggest names in finance, including Super Bowl advertisers, are among the most disparate.

At Bank of America, N.A., American Americans were over 26 times more likely to be confined to higher cost loans than whites;

At Citigroup's mortgage company, CitiMortgage Inc., American Americans were over 8.6 times more likely to be confined to higher cost loans than whites;

At Wells Fargo Bank, N.A., American Americans were over 7.2 times more likely to be confined to higher cost loans than whites, and Hispanics were over 2.8 times more likely to be confined to higher cost loans than non-Hispanic whites;

At Chase Manhattan Mortgage Corp., American Americans were over 6.7 times more likely to be confined to higher cost loans than whites, and Hispanics were over 2.9 times more likely to be confined to higher cost loans than non-Hispanic whites;

At Wachovia Mortgage, American Americans were over 3.1 times more likely to be confined to higher cost loans than whites.

    Several major regional banks were also among the most disparate:

At ABN Amro Mortgage Group, American Americans were over 13.2 times more likely to be confined to higher cost loans than whites, and Hispanics were over 7.8 times more likely to be confined to higher cost loans than non-Hispanic whites;

At Fifth Third Mortgage, American Americans were over 10.3 times more likely to be confined to higher cost loans than whites, and Hispanics were over 6.3 times more likely to be confined to higher cost loans than non-Hispanic whites;

At National City Mortgage, American Americans were over 7.9 times more likely to be confined to higher cost loans than whites, and Hispanics were over 4.2 times more likely to be confined to higher cost loans than non-Hispanic whites; and

At The Huntington National Bank, American Americans were over 4.1 times more likely to be confined to higher cost loans than whites, and Hispanics were a whopping 29 times more likely to be confined to higher cost loans than non-Hispanic whites.

    Significantly, in light of the $325 million predatory lending settlement announced Jan. 23, major  Super Bowl advertiser Ameriquest Mortgage in 2004 made 381 loans to African Americans in the Detroit MSA, 315 of them over the rate spread. Meanwhile, Ameriquest’s affiliate Argent Mortgage, which the state attorneys general left out of the settlement and reforms, made 2673 loans to African Americans in the Detroit MSA in 2004, 2142 of them over the rate spread. So the settlement covers less than 12.5% of ACC Capital Holdings’ loans to African Americans, and an even smaller percentage of ACC’s higher cost loans over the rate spread. [And see Ameriquest articles below.]

            A rare lender with an even higher percentage of rate spread loans in Detroit in 2004 was BBVA’s “Homeowners Loan Corporation,” which in November 2005, after petitioning by Fair Finance Watch, settled predatory lending charges with the Office of the Comptroller of the Currency. Last week, insiders at HLC’s Atlanta headquarters told Inner City Press that Homeowners Loan Corporation has just engaged in wholesale layoffs. Not unlike the Big Three auto firms in Detroit. "We’re rooting for Detroit – but the predatory lenders must be rooted out,” Fair Finance Watch concluded.

Recent related Inner City Press reports:

Argent Mortgage Layoffs, One Week After Ameriquest's $325 Predatory Lending Settlement

One week after announcing a $325 million predatory lending settlement by three of its subsidiaries, ACC Capital Holdings on January 30 has reportedly laid off 16% of the workforce of its non-covered subsidiary, Argent Mortgage.  So, analysts wonder, will Ameriquest’s settlement be paid by eliminating what few levels of oversight exist in Argent Mortgage’s subprime lending process?  The layoff reports have reached Inner City Press from impacted employees, one of whom writes:

Subject: Argent Layoffs

Sent: Mon, 30 Jan 2006 16:39:48 -0800 (EST)

From: [Name withheld]

To: Ameriquest-Watch [at] innercitypress.org

Argent has laid off 16% of their workforce, approximately 1250-1500 [Editor's note: see 2/1/06 update, below] in job cuts that took place this past Friday and Today. The positions include mostly production jobs, but cuts were also made within their corporate staff. No sales positions were eliminated. One of the biggest changes to come from this consolidation has been the elimination of set-up and doc draw employees. Underwriters will perform the set-up function, and funders will assume the duties of the doc-drawers. Customer service levels and turn time may be affected by these changes.

Layoffs by Location:

200 Doc-drawers and set-up workers in White Plains, NY

~100 Doc-drawers and set-up workers in Schaumburg, IL

  Also

Subject: Argent Update 1/30/06

Sent: Tue, 31 Jan 2006 00:26:48 +0000

From: [Name withheld]

To: Ameriquest-Watch [at] iinnercitypress.org

I thought you would be interested to know that Argent Mortgage laid off approximately 16% of its workforce today. Luckily, I still have a job, but I would like to see what you write about it. I find your site very informative.

   Beyond the kind words, one of the questions raises by the specific job-functions that have reportedly been targeted for the layoffs is whether, just after three subsidiaries have settled predatory lending charges, the non-covered subsidiary should be eliminating what oversight it has of its lending process.  What will the attorneys general (or the U.S. Senators considering the nomination of ACC founder Roland Arnall to become U.S. ambassador to the Netherlands) or most importantly the consumers impacted by ACC and Argent have to say about these strangely-timed layoffs? Only time will tell…

  In other media, North Carolina’s attorney general’s spokeswoman has tried to explain the loopholes in the settlement by telling the Charlotte Observer that the settlement was necessarily "limited to activities over which Ameriquest had direct control."  We note that by laying-off 1200 employees at Argent, ACC can claim to have even less control over Argent’s high-cost subprime mortgages. The St. Louis Post-Dispatch has reported on a sample instance of a borrower whom ACC instructed “to file another application - and this time include a letter stating that she owns a cleaning company. ‘They told me what to write,’ she recalls. She says Ameriquest loan officers instructed her to write that she had received an advance of $12,000 to clean two office buildings. It wasn't true, but Hopkins says she and her husband needed the $125,000 loan... They eventually lost the house.” 

In other St. Louis news, Fair Finance Watch has filed comment on the proposed acquisition there of Forbes First National Corporation’s Pioneer Bank & Trust Company by notorious subprime lender National City Corporation – click here to view, and click here for FFW Jan. 30 comments on Whitney National Bank’s attempt to buy 1st National Bank & Trust in Florida.

[Editor's update 1: late on the afternoon of Jan. 31, ACC's spokesman confirmed by email the Argent layoffs, reported 24 hours earlier by Inner City Press. He wrote that "this consolidation increases our efficiency."]

[Editor's update 2: on February 1, ACC emphasized to Inner City Press that while the 15% layoff figure is correct, the individual who first wrote in to us with the employee number over 1,000 was wrong, that the number is 600. Duly noted -- along with ACC's argument that that Argent does not, even cannot, control the mortgages it makes, much less now with 600 fewer employees.]

Predatory Lending Settlement Leaves Out Ameriquest’s Largest Lender, Argent, Critics Say

Jan. 23 – Earlier today, the largest subprime mortgage lending conglomerate in the United States, ACC Capital Holdings Corporation, announced a $325 million predatory lending settlement with the attorneys general of more than 40 states. Almost immediately, questions were raised as to why the settlement does not cover ACC’s subsidiary which made the most high-cost loans in 2004, Argent Mortgage.

            The settlement comes at a convenient time for ACC and its founder, Roland Arnall. In two weeks, the company plans a major multi-million dollar advertising campaign connected to the National Football League’s Super Bowl XV in Detroit. Arnall has been nominated to become the United States ambassador to the Netherlands. He has seen his confirmation stalled for months due to the pending settlement. But given the perceived loopholes in the settlement, critics question whether Arnall’s nomination should be forward in the U.S. Senate.

            In 2004, the most recent year for which Home Mortgage Disclosure Act data is available, ACC’s Ameriquest Mortgage made 185,833 loans, while its Argent Mortgage unit made 215,403 loans, more than half of them over the federal regulators’ high cost definition, of three percent over comparable Treasury securities on a first lien, and over five percent on a subordinate lien.  Studies of the data have shown that ACC and Argent direct a much higher percent of their high cost loans to African Americans and Latinos than is true of other, prime-priced lenders.

            Inner City Press in mid-2005 submitted Freedom of Information Act requests to many states’ attorneys general, for copies of consumer complaints against ACC and Argent. ACC’s legal department opposed the release of any information, resulting in ongoing litigation, including in Texas.

            ACC and its predecessors have previously purported to reform their practices, as far back as 1996 with the Department of Justice and Office of Thrift Supervision (when the company was named Long Beach Mortgage), in 2000 with the Federal Trade Commission, and since. Among those questioning the settlement are class action lawyers, by means of a press release. Consumer protection advocates, however, emphasize the need for binding reforms at ACC including Argent, and not only monetary settlement for past loans.  This is a developing story.

   The settlement has also given rise to questions about the due diligence performed by the investment banks which have helped package Ameriquest’s loans and sell them as mortgage-backed securities, including the three largest banks in the United States: Citigroup, JP Morgan Chase and Bank of America. Each of these three banks has securitized Ameriquest loans, while claiming to screen out predatory loans. With today’s settlements, questions are being raised about these banks previous defenses of their practices.

Other recent Inner City Press reports

Who Pays for the Global Bird Flu Fight? Not the Corporations, So Far - UN

Royal Bank of Scotland Has Repeatedly Been Linked to Terrorist Finance and Money Laundering, Not Only in the Current Brooklyn Case

From Appalachia to Wall Street: Behind the Mining Tragedy, UBS and Lehman Brothers

Iraqis Absent from Oil Oversight Meeting on Development Fund for Iraq, Purportedly Due to Visa Problems

Watching the Detectives: Oversight of the Development Fund for Iraq Will be Discussed at the UN on December 28, 2005

From the UN Budget, Transit Strike, to the USA Patriot Act, 2005 Ends with Extensions

Some previous highlights and special reports:

Citigroup Dissembles at United Nations Environmental Conference

The United Nations' Year of Microcredit: Questions & No Answers

Other Inner City Press reports are archived on www.InnerCityPress.org -  if you have trouble finding previous articles, please contact us

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