Class Action Suit Against Minnesota Mortgage Lender Green-Lighted
A Hennepin County judge has granted class-action status to a lawsuit that accuses bad credit mortgage lender Ameriquest Mortgage Co. of abusive and fraudulent lending practices.
The ruling by District Judge Lloyd Zimmerman, issued late Wednesday, allows the lawsuit to represent 22,000 Minnesota mortgage holders who borrowed money from Ameriquest from 1999 to the present.
“It’s a significant ruling,” said Gordon Rudd, a partner with Zimmerman Reed, a Minneapolis law firm representing the borrowers. “Rather than facing [four] borrowers, Ameriquest faces thousands of borrowers. It increases the stakes.”
Ameriquest spokesman Chris Orlando noted that Zimmerman did not rule on the lawsuit’s merits. He said the home mortgage company plans to appeal the decision.
“The ruling dealt with an untested area of law and should be reviewed by an appellate court,” Orlando maintained.
Although the lawsuit was first filed in February 2005, the charges against Ameriquest are especially noteworthy in light of recent woes in the subprime mortgage market. Industry officials, regulators and experts have blamed the sharp rise in subprime loan defaults on the aggressive marketing and sales of risky bad credit mortgages to borrowers who ultimately could not pay back their loans.
“The problems we have seen in the subprime market are exemplified by Ameriquest,” Rudd said. “The rush to write as many loans as possible regardless [of whether consumers] were able to satisfy their obligations.”
Last year, Ameriquest agreed to pay $325 million and halt abusive lending practices in 47 states after an investigation initiated by then-Minnesota Attorney General Mike Hatch. Minnesota housing market consumers were expected to receive about $10 million.
Many of the allegations in the lawsuit are similar to Ameriquest practices uncovered by Hatch’s investigation: pressuring low-income borrowers into unfavorable high-interest loans, inflated appraisals, encouraging borrowers not to read home purchase loan documents and concealing or switching loan terms in the final closing documents.
One plaintiff, Terry Baumgartner, claims that Ameriquest forged her signature on tax and other documents, rushed her through the closing process and misled her into believing that her interest rate was 6.75 percent, when instead it was an adjustable rate of 9.5 percent.
Plaintiffs Luke and Tracy Ricci were seeking to consolidate debt via mortgage refinancing.
The couple allege that Ameriquest inflated the appraisal on their home and failed to disclose that their loan had an adjustable rate and several prepayment penalties and fees. As a result, the Riccis claim they were unable to sell their home when they wanted to in 2003
SOURCE: The Minnesota Star Tribune