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Former subprime leader Ameriquest closes amid sale of parent

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LOS ANGELES -- Ameriquest Mortgage Co., once the nation's largest subprime lender, will close with barely a whimper, after the other assets of its parent company were sold Friday to Citigroup Inc.

Ameriquest, which saw its fortunes soar during the housing boom by lending to people with less than stellar credit, is the latest victim of a mortgage crisis that has left bankrupt companies and cash-strapped borrowers in its wake.

Along with shuttering Ameriquest, Orange-based ACC Capital Holdings also said it was selling its wholesale mortgage origination operation and a mortgage servicing business to Citigroup (NYSE: C) for an undisclosed sum.

"ACC Capital Holdings is going to maintain operations as it prepares for the orderly wind-down of our retail mortgage business, which is no longer accepting applications," the company said in a statement.

Ameriquest was once so successful it paid millions of dollars to tack its name onto the Texas Rangers baseball park.

However, it stopped taking new mortgage applications on Aug. 1, ACC disclosed late last week.

Ameriquest had been operating on a greatly diminished scale since closing its national network of offices late last year and consolidating operations into several retail call centers.

Under the agreement with ACC, Citigroup acquires servicing rights for $45 billion worth of loans. Terms of the deal, expected to close Sept. 1, were not disclosed.

Citigroup is the nation's largest financial institution.

The sale includes operational centers in Orange and Rancho Cucamonga, along with Rolling Meadows and Schaumberg, Ill., as well as a broker network extending across 48 states.

Citigroup had agreed in February to provide working capital to ACC. As part of that infusion, Citigroup had an option to acquire the assets.

"To have completed this transaction in the current business environment with a leading financial institution such as Citi is an affirmation of the hard work and dedication of our employees," said Adam Bass, vice chairman of ACC.

Citigroup shares rose 65 cents to close at $46.88.

Through the deal, the company expects to gain "operational and pricing efficiencies and the ability to extend the high lending standards of our existing residential mortgage business from point of origination through securitization and servicing," Jeffrey Perlowitz, head of global securitized markets in Citigroup's fixed income, currencies and commodities unit, said in a statement.

Ameriquest made a billionaire of its founder and chief owner, Roland Arnall, who now serves as U.S. ambassador to the Netherlands. He founded his company as Long Beach Savings in 1979 and built it into a major subprime lender.

For years, Ameriquest operated successfully alongside competitors such as New Century Financial Corp. and Countrywide Financial Corp. (NYSE: CFC).

But last year, ACC got caught by a wave of delinquencies and defaults that swept through the subprime mortgage market.

During the past year, the company cut thousands of jobs.

Meanwhile, New Century declared bankruptcy, while Countrywide exited the subprime mortgage business altogether and recently borrowed $11.5 billion and sold a $2 billion stake to Bank of America (NYSE: BAC) so it could keep operating its retail banking and mortgage lending businesses.

In 2006, ACC agreed to pay $325 million in a multistate settlement over claims of deceptive lending practices.

The lender did not admit to any wrongdoing as part of the settlement but agreed to provide borrowers with full disclosures on the terms of loans, stop giving its lending agents financial incentives to include higher fees or other penalties on loans, and change how it handles appraisals.

In March, the Texas Rangers severed a 30-year naming rights deal with Ameriquest and rebranded their home field as Rangers Ballpark in Arlington.

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