Subprime Lender Commits $360 Million To Consumer Safeguards
Bowing to demands from a confrontational network of community organizations, one of the nation's leading subprime lenders has agreed to what could become model standards for subprime lending safeguards.
In a $360 million commitment for consumer safeguards against predatory lending Ameriquest Mortgage Co. has agreed to standards it says could define the ethics in home mortgage lending.
Under the three-year pilot program, Ameriquest will make subprime mortgage financing available to residents in up to 10 low and moderate-income urban neighborhoods while ACORN (Association of Community Organizations for Reform Now) and its affiliate ACORN Housing Corporation will provide consumer information, financial education and loan counseling services to community residents.
ACORN, the nation's largest low and moderate-income membership organization, has been waging an in-your-face war against predatory mortgage lending and since last fall staged a steady stream of local protests against Ameriquest Mortgage Company.
In March more than 400 ACORN members from around the country stormed the Washington, DC office of Salomon Smith Barney, which purchases loans from Ameriquest. Later that same day, the 400 ACORN members took over an Ameriquest office and occupied it for over an hour until Ameriquest's president called from California and agreed to meet and negotiate about how Ameriquest should improve their practices.
The confrontations were among others that set the stage for Ameriquest's commitment.
"The ACORN pilot with Ameriquest is an exciting new program that offers families in low income neighborhoods a better deal than they will get with any other subprime lender," said Maude Hurd, ACORN president.
"ACORN members and others in low income neighborhoods need access to credit to become homeowners; to repair their homes; and to meet other critical financial goals. This program will deliver loans to meet these needs -- and it will do so offering the strongest safeguards and the best terms in the industry. Just as important, this initiative will help raise the bar for the rest of the subprime industry," Hurd added.
With more than 190 offices nationwide, Ameriquest is dropping prepayment penalties, offering a 3 percent limit on loan fees, interest rates 50 points below average subprime rates and eliminating the credit life insurance option, according to ACORN.
The program rolls out in Albuquerque, Baltimore, Chicago, Dallas, Houston, Jersey City, Los Angeles, Oakland, Philadelphia, and St. Louis.
"These provisions are just what ACORN Housing Corporation's mortgage counseling clients have been looking for," said Hurd.
Ameriquest is also offering a so-called "Best Practices" code of conduct formulated during negotiations with ACORN and the Consumer Mortgage Education Consortium (CMEC), an organization formed in 1996 with the support of Ameriquest and three leading Washington, D.C.-based civil rights organizations.
Among the Best Practices:
"These new safeguards -- the strictest standards in our industry -- will help elevate the vision for good corporate citizenship among all subprime mortgage lenders,'' said Kirk Langs, Ameriquest president
"We are in the forefront of a public-spirited reform effort to raise the level of consumer protection and public service throughout our industry."
It's about time.