Ameriquest hasn’t yet explained how it allegedly charged some customers more in prepaid finance charges than allowed by state law, but the Department of Banking last week continued the process of denying the company’s applications for some first and secondary mortgage lender/broker licenses.
Banking Commissioner John D. Burke sent a letter to Ameriquest’s Orange, Calif., office by registered mail on Jan. 24 explaining that he would not renew first and secondary mortgage lender/brokers licenses for the company’s Bloomington, Minn., office – the fourth Ameriquest office to which he has denied a license.
The refusal to grant the license comes after the Department of Banking asserted in January that, for the second time in three years, Ameriquest and some of its subsidiaries imposed prepaid finance charges that exceeded the amount allowed by Connecticut law. The department on Jan. 10 issued a notice of intent to send a cease-and-desist order to the company, requiring Ameriquest to stop overcharging customers with prepaid finance charges on loans. It also issued a notice of intent to impose a civil penalty and a notice that the commissioner intends to refuse to renew Ameriquest’s first and secondary mortgage lender/broker licenses in Connecticut.
The Department of Banking conducted an investigation earlier this year and last year.
“As a result of such investigation, I have reason to believe that during the period from Aug. 1, 2003, to Aug. 1, 2004, [Ameriquest] … imposed prepaid finance charges in connection with the refinancing of at least 53 first mortgage loans that the applicant or an affiliate of the applicant had previously made to Connecticut consumers, which prepaid finance charges, when aggregated with the prepaid finance charges imposed by the applicant or its affiliate for such previous financings, exceeded the greater of 5 percent of the principal amount of the initial loan or $2,000,” wrote Burke in his Jan. 24 letter. “Moreover, on Jan. 22, 2004, the applicant entered into a settlement agreement with this department imposing sanctions, including a civil penalty, for repeated violations of Section 36a-498a of the Connecticut General Statutes, for loans that occurred prior to Aug. 1, 2003.
“Based on the facts mentioned above, I am unable to find that the financial responsibility, character, reputation, integrity and general fitness of the applicant and of its officers, directors and principal employees are such as to warrant belief that the applicant’s business will be operated soundly and efficiently, in the public interest and consistent with the purposes [the pertinent laws] of the Connecticut General Statutes.”
The law Ameriquest allegedly violated first came on the books about two years ago. It says that mortgage lenders making a first mortgage loan can’t charge prepaid finance charges that exceed, in total, more than 5 percent of the principal amount of the loan or $2,000. If the proceeds of the loan are used to refinance an existing loan, the total of that refinancing and any prepaid finance charges from loans given by the same broker cannot exceed 5 percent of the principal amount of the loan or $2,000.
The law initially caused some uproar, but hasn’t been a problem for most mortgage companies, said Frank Haran of New Britain-based McCue Mortgage and the chairman of the Connecticut Mortgage Bankers Association Legislative Committee.
“People had to get used to it,” he said. “I’m not aware that many people were affected with it.”
But when it was first introduced, some companies were against it because it could lead them to lose business, said Kim Neilson, senior vice president at McCue. Prepaid finance charges allow borrowers to lower their interest rates, and since Connecticut doesn’t allow those to go above 5 percent, some borrowers have to shop between different mortgage lenders to get the deal they want, if they’ve already reached 5 percent with their original lender.
It can be complicated, but isn’t a problem for small companies like McCue, Neilson said. Because they have good technology and are small, it’s easy to keep track of borrowers’ different loans and refinances. But for a national company with far-flung branches, like Ameriquest, it could be more difficult unless they have up-to-date technology that effectively links all the branches, Neilson said.
