Orange-based Ameriquest Capital Corp. lets its money do the talking.
The holding company for a handful of subprime mortgage businesses has invested heavily in advertising, including two Super Bowl commercials.
It’s a big sponsor of Major League Baseball, with its name on the stadium home of the Texas Rangers and its golden bell logo dotted throughout Angel Stadium of Anaheim.
The company, which makes home loans to those with imperfect credit and, lately, those with good credit, even has its own blimp.
But beyond marketing, privately held Ameriquest has opted to focus on growing the company instead of saying much publicly.
Adam Bass, senior executive vice president and a confidant of politically connected owner Roland Arnall, is the only one at the company who does interviews, and not many at that.
Now reporters are knocking on Ameriquest’s door with some touchy questions.
|
|
||
|
Ameriquest blimp: company did estimated $80 billion in loans last year |
It all started in February with a Los Angeles Times story. The paper quoted former workers who said Ameriquest runs “boiler room” offices where people stray from ethics in the quest for big salaries.
The story since has been echoed in other papers. Ameriquest has been hit with lawsuits on behalf of consumers and faces scrutiny from several state attorneys general.
In March, Ameriquest agreed to pay up to $50 million to settle a class-action lawsuit brought by borrowers in California and three other states.
Lawsuits and government probes aren’t all that shocking in the politically sensitive subprime lending business. But all the attention is new for Ameriquest, which quietly has grown to be the nation’s largest subprime lender.
The company’s approach to the attention has been to respond selectively. It hasn’t directly addressed allegations made in stories but has said it takes fraud charges seriously.
The company also has stressed the role it plays making loans to borrowers who may not be able to get funding elsewhere.
In a statement for this story, an Ameriquest spokeswoman said the company doesn’t comment on legal issues.
Ameriquest has said elsewhere that it has “procedures and internal controls in place that are designed to ensure that underwriting standards, pricing policies and property valuations are fair and accurate.”
Going Prime
The coverage comes at a key time for Ameriquest, which counts an estimated $2.5 billion in yearly sales, mostly from its Ameriquest Mortgage Co., the nation’s largest subprime lender.
In the past year, Ameriquest has been mounting a push into traditional mortgage lending, going head-to-head with big names such as Countrywide Financial Corp., Bank of America Corp. and a slew of other lenders.
The company’s advertising and sports marketing is part of the expansion effort.
Ameriquest isn’t losing business from the negative publicity, said George Yacik, who follows the subprime industry for Hackettstown, N.J.-based SMR Research Corp.
The opposite seems to be true, he said.
Just about all coverage of subprime lending in the past five years has been negative, with politicians talking about “predatory lending,” Yacik said.
All the while, the industry,heavily concentrated in Orange County,has boomed.
Along with Ameriquest, the county is home to five of the top 10 players: Irvine-based New Century Financial Corp., Washington Mutual Inc.’s Anaheim-based Long Beach Mortgage Co., Irvine-based Option One Mortgage Corp., a unit of H & R; Block Inc, and Fremont Investment & Loan in Anaheim.
Ameriquest leads the industry, doing about $80 billion in loans last year, Yacik said. That represents annual growth of more than 100%, he said.
Irvine’s New Century, the next biggest subprime lender based here, does about half as much volume, he said.
Ameriquest also has the benefit of being a private company. These days, negative news has proven devastating to a company on Wall Street.
But Ameriquest keeps its financial details close to the vest and is under less pressure to speak with reporters.
It’s understandable why any company facing litigation would hesitate to speak with reporters, said Michael Sitrick, who runs Los Angeles-based public relations firm Sitrick And Co.
“You don’t want to win in the court of public opinion and lose in the court of law,” he said.
Ameriquest’s size lets it offer attractive loans to subprime borrowers, a factor that may hold more sway with customers than recent news coverage.
Angelo Mozilo, chief executive of Calabasas-based Countrywide, said in an April conference call that his company faces “an Ameriquest issue,” or competition on subprime loans from Ameriquest.
Other industry players privately say Ameriquest has been gaining market share.
For now, subprime borrowers are “not reading the stories or don’t believe them,” Yacik said.
There is risk for Ameriquest if the fallout escalates. The news could spur more regulation and lawsuits, possibly from states.
Attorneys general and regulators in 25 states are looking into Ameriquest’s lending practices, and those of other subprime lenders.
Government scrutiny and lawsuits caused Irvine-based subprime lender First Alliance Corp. to close in 2002. The company wasn’t a top player.
Because of its size, Ameriquest can withstand some negative publicity, according to Richard Theiss, director of marketing with Brea-based subprime lender Residential Mortgage Assistance Enterprise LLC.
Ameriquest could lose some customers, he said. But the company could overcome the bad press if it appears to be addressing the issues raised, he said.
Risk of Regulation
Regulation is a greater risk to subprime lenders, according to Theiss.
Some cities and states have passed or debated laws to restrict subprime lending, which they say puts the homes of minorities and poor people on the line.
“We understand their concerns,” Theiss said. “But we don’t want to see predatory lending laws that are too restrictive and therefore in the end deprive the borrower of financial resources.”
The biggest concern for Ameriquest,and any major subprime lender,is a drying up of the market for loans packaged as bonds for Wall Street. That happened in the late 1990s. Observers say it’s a remote risk today.
A more pressing worry is a narrowing of the spread between what subprime lenders take in as interest on mortgages and what they pay out to bond holders. Subprime mortgage rates typically are fixed, while bond payments are tied to the London Inter-Bank Offered Rate, which has been rising. That eats at profits.
Another fear: a downturn in home prices. That leaves borrowers with less appreciation in their homes to tap. Even worse, a loss of home equity could lead some subprime borrowers to default on mortgages.
Last year, New Century warned about the prospect of a higher loan delinquency rate, an early warning for defaults. But last week said it was “trending better than previously anticipated.”
Still, “2005 has been and will continue to be a challenging year due to rising interest rates, moderating home-price appreciation and the competitive landscape,” New Century said.
