Ameriquest Allegations Lead to Solid Investigative Work

The sub-prime mortgage market may not appear to be the most desirable industry to cover on the business desk. In Ameriquest's case, appearances are definitely deceiving.

Journalists Mike Hudson of The Roanoke Times and E. Scott Reckard of The Los Angeles Times recently authored an investigative piece on the mortgage giant whose offices dot the country. Former employees of Ameriquest allege practices that include hidden fees, fabrication of data and forged documentation.

Workers consistently compared the corporate culture at Ameriquest offices nationwide with that of the movie "Boiler Room."

"One of the hallmarks of an investigative story is what you leave out," Hudson says. "What we put in was a fraction of the lawsuits and complaints. If you write a story and have a lot of notes left over, you've done your job."

To get the story behind this article, which appeared in The Los Angeles Times on Feb. 4, Managing Editor Kevin Sweeney spoke with Reckard.

Sweeney: How did this story initially come about?

Reckard: Mike Hudson's initial work is what drove the story. He had discovered complaints that Ameriquest was not operating as it should be. Mike wanted to work on the story with a publication that would have national impact, and approached the Los Angeles Times because Ameriquest was based in Southern California. He originally approached the Washington bureau, and then got hooked up to the Times business editor, Rick Wartzman, and markets editor John Corrigan, my boss, to pitch the idea of working together. As a banking reporter who had investigated fraud, I was on board.

Sweeney: What were the first steps after a decision was made to begin research on Ameriquest practices?

Reckard: The sub-prime mortgage industry is a business model that breeds complaints. I was very concerned with being fair to Ameriquest. We did public records requests to state and federal regulators and it turned out that the number of complaints for Ameriquest far outpaced others in the industry, even when you factor in volume of loans.

Sweeney: What federal sectors did you question to grasp what was occurring at Ameriquest?

Reckard: Interestingly, the Federal Trade Commission didn't have a lot to tell us. There was not a lot of indication the FTC was continuing to monitor these guys. They had called off an investigation back in 2001 after Ameriquest settled with a grassroots group called ACORN, which had been protesting its lending practices.

Sweeney: What were some of the practices that you discovered were at the heart of the complaints?

Reckard: Bait and switch -- the interest rates and fees on loans being greater than borrowers had been led to believe. Forged documents, including W-2s, to make it look like borrowers made more money. Constant refinancing. As part of its settlement with ACORN, Ameriquest had promised not to approach customers about refinancing a loan within two years. But our data checks showed these refis were occurring more at Ameriquest than at its competitors. After talking to some business associates, we also got the sense that Ameriquest appraisals were over-inflated.

Sweeney: What surprised you most about the revelations that emerged from your research?

Reckard: It was the consistency of the stories, no matter where the employees worked across the country. So many people brought up the movie "Boiler Room." There were long hours, forced overtime and ever-mounting pressure to generate loans. Ameriquest was closing loans faster than anyone else, but doing the paperwork later. That wasn't happening elsewhere in the industry.

Sweeney: What did you think was important to learn from the company perspective?

Reckard: I wanted to talk to the company about how many of these problems had occurred and how Ameriquest dealt with them. We agreed to submit a list of written questions and set a deadline for the company to return them. At 4:20 p.m. on the day of editing, the company faxed over public-relation generated answers. They did not address many of the specific questions over alleged improper practices.

Sweeney: What can other business journalists take away from this story?

Reckard: This story emphasized the fact that regulation is scattered in the lending industry. HUD provides very complete data going back for years on a volume of loans. In many cases, you can pull up the filings online from court records.

Sweeney: What has been the overall reaction to this story?

Reckard: Within a couple of days, we got dozens of calls and e-mails from employees who were just so thankful. You know that you've hit the nail on the head. We've also got calls from employees of competitors wishing to talk about the practices of their own companies.