Orange, Calif.-based Ameriquest Mortgage Co. is pulling out of the Bay State, closing all of its local offices as part of a major consolidation. The announcement comes on the heels of a multimillion-dollar settlement between the mega subprime lender and state attorneys general.
Having been accused of falsifying home values and borrower incomes and using high-pressure tactics, Ameriquest settled with attorneys general and regulators from 49 states in January, agreeing to pay $325 million. An estimated $12.2 million was earmarked to go to as many as 15,000 Massachusetts homeowners. It is the second-largest settlement ever reached with a lending company, and the third-largest consumer protection settlement.
Aseem Mital, chief executive officer of ACC Capital Holdings Corp. – parent company of Ameriquest – said in a statement released by the company in January that the settlement would not leave the company in any sort of financial trouble.
On May 2, ACC Capital Holdings announced it was closing 229 retail branches and laying off approximately 3,800 employees. Chris Orlando, vice president of corporate communications for Ameriquest, said nine Massachusetts locations will be closed, including six Ameriquest branches and three offices of Town & Country Credit, another ACC subsidiary. Orlando said the changes will allow Ameriquest to remain a competitive player in the mortgage industry. Ameriquest will centralize into existing regional mortgage production centers, he noted, saying it is part of the company’s new strategy that was designed to fit into today’s market.
However, state regulators were shocked to learn only one day before the closings that Ameriquest was shutting down its local operations, according to Chris Goetcheus, a spokesman for the Massachusetts Office of Consumer Affairs and Business Regulations.
“I think it came as quite a surprise to their employees and the regulators who they may have neglected to notify,” he noted.
On the Friday after the office closings were announced, the Division of Banks received notice of the company’s plan. Ameriquest’s applications to close the branches are being reviewed and the state Division of Banks is looking into whether proper notice was given, said Goetcheus.
Goetcheus added that the commissioner of banks could take action against the lender for failing to comply with state regulations, which demand a 30-day notice prior to the closing of a loan office, if regulators rule that proper notice was not given. He said Massachusetts regulators did receive a tip from the Iowa attorney general the day before the Ameriquest announcement.
Orlando said Ameriquest announced the closings and laid off the staff on May 2, but corporate representatives remain at the Massachusetts locations and the offices will be manned by representatives for a 30-day period.
“We believe that we are in compliance with state and federal laws,” said Orlando.
‘Financial Reasons’
Ameriquest had 800 open loan applications from Bay State borrowers and 120 open loan applications through the three local Town & Country Credit offices at the time of the closings, said Goetcheus. He said the company still plans to handle those applications and has informed its customers of the situation. It also has provided area consumers with an 800 number to check their loan status. The company is still licensed to conduct business in the state, which it will need to maintain if it plans to continue doing business in the state through the Internet or over the phone.
It is not the first time Ameriquest has shut down local offices. In October 2005, the company notified the DOB that it wished to close four Massachusetts offices and did so a month later.
Although there has been speculation among mortgage professionals that the closings are a result of the settlement, there is also an industry trend of office closings, cutbacks, mergers and acquisitions, say industry watchers.
“All that is doing is putting a name to the trend,” said Jim Jones, founder and president of First Wellesley Consulting Group, a firm specializing in the financial services and real estate finance industries. “When you get a downtime in volume, you are going to start hearing [office closures] announcements.”
In February, Washington Mutual, a national lender based in Seattle, announced it was consolidating the network of processing offices that provide administrative support to its home-loan businesses from 26 to 16 locations. The plan included closing two of its Massachusetts retail operation centers, which eliminated 165 Bay State jobs.
“The action is in keeping with strategies the company outlined at its annual investor conference last November to revamp its back-office operations from one shaped by acquisitions to one that reflects current business needs while increasing efficiency companywide. Those strategies include consolidating real estate and moving back-office functions to lower-cost domestic and offshore locations,” according to the WaMu press release. “In addition, this action reflects the company’s ongoing focus on adjusting the cost structure of its home loans business and effectively managing capacity to better match current and anticipated mortgage-market conditions.”
“Companies make decisions for financial reasons. It is unprofitable to continue as is,” said Jones. “You have to rationalize the organization so you can hold down a profit.”
Jones, who follows local and national mortgage trends, said as larger companies reevaluate their business structure in the face of a shrinking loan market, changes are going to occur. He said he expects more mortgage companies will take actions similar to the large lenders who have recently announced downsizings and restructuring of their companies.
Jones said the moves by companies like Ameriquest and WaMu illustrate the direction in which the market is headed. At the same time, he added, it sends a message to the whole lending community that the big players are not willing to wait out the slow time.
“They are betting on the fact that volumes will remain low. They are signaling the market that this downtime is going to last awhile,” said Jones.
Jones predicted that the industry is headed for a two-year stint during which loan volumes will continue to decrease. He also foresees more big players leaving the local market, if not the industry altogether.
James Dougherty, executive director of the Massachusetts Mortgage Association, said consolidation in the industry means there are fewer players battling over a shrinking loan pool.
“I am sure the rest of the market is looking at it, as there is a whole section of customers opening up,” said Dougherty.
“The overall mortgage market is extremely competitive and largely based upon current and cyclical market trends,” said Kevin Cuff, executive director of the Massachusetts Mortgage Bankers Association. “The strength of the larger players in the industry comes from a proven formula of hard work, fundamental training and more hard work. Consolidation and downsizing today will lead to a healthy and more productive company prepared for the challenges of a growing market tomorrow.”
