It was learned today in an article in the Wall Street Journal, that Ameriquest Mortgage, one of the nation's largest subprime lenders made over $20 million in political donations and played a key roll in rolling back legislation in Georgia and New Jersey that would have protected consumers during the housing boom. Countrywide, Wells Fargo and Citigroup and the American Mortgage Bankers Association also contributed heavily to lobbying and legislative efforts to defeat or amend laws that would have protected home owners and buyers. Countrywide Financial made gifts to campaigns of over $2 million and spent $6.7 million on lobbying efforts in Washington. President Bush received more than $200,000 for his 2004 reelection campaign. Political organizations that represented the president received $5 million from Ronald Arnall (and his wife, Dawn), the founder of Ameriquest. In 2006, Mr. Arnall was appointed by President Bush as Ambassador of the Netherlands and his wife became chairman of ACC Capital, the parent company of Ameriquest. California governor's, Arnold Schwarzennegger's reelection campaign received $1.4 million and stacks of tickets to a Rolling Stones Concert.
Wright Andrews, a Washington lobbyist and his wife, Lisa were responsible for much of the industry's lobbying and received payments of over $4 million from 2002 to 2006. Mr. Andrews ran 3 different subprime trade groups which included The National Home Equity Mortgage Association, The Coalition for Fair and Affordable Lending and The Responsible Mortgage Lending Coalition. The Coalition for Fair and Affordable Lending spent $6.3 million before it went out of business this year. The other two trade groups are now out of business as well.
Ameriquest was founded in 1979 as Long Beach Savings & Loan by Mr. Arnall. He shed all of the operation in this S&L, with the exception of the retail-mortgage department which became he named Ameriquest. During the refinancing boom of the 90's, the company refinanced many homes at more than their appraised value, at relatively high interest rates.
In 2006, ACC Capital paid $325 million in a settlement with regulators for charging excessively high mortgage rates and for failure to fully disclose loan risks. Some of the state's attorney generals who signed the settlement received received campaign donations from the ACC. Utah Attorney General Mark Shurtleff received $1,000 and Rolling Stones tickets.
State legislators in Georgia, Maryland, Nevada, Oregon, Utah, Washington and California also received Rolling Stones tickets.
At the heart of the legislation in both Georgia an New Jersey was a clause that required that a lender prove that the refinancing of a home owned for less than 5 years have a "tangible net benefit" for the borrower. Later (on separate occasions), Standard & Poor Corp. decided they would not assign credit ratings to mortgage securities containing subprime loans coming from these two states. Without these ratings from S&P, mortgage securities cannot be sold. Additionally, federal banking regulators banned states from applying consumer-protection to federally chartered banks and thrifts so that they would not have an advantage over state-chartered ones. In the meantime, because of pressure from subprime lobbyists, both of the state's laws that protected consumers were changed, making it legal to continue offering subprime loans. In the aftermath of these changes, thousands of New Jersey homeowners took out these high risk subprime loans and many are now in foreclosure.
After the victories for subprime lenders in Georgia and New Jersey, state legislators in Texas considered enacting laws to regulate home appraisers, because of, "overly generous valuations" that were causing serious problems with home loans in that state. In 2006, ACC Capital (Ameriquest's parent company) gave $350,000 to Texas politicians and $100,000 to Governor Rick Perry to successfully defeat any possible new laws to curtail unethical appraisal practices.
It seems ironic that both President Bush and California Governor Arnold Schwarzenegger are now befriending troubled subprime borrowers who face the threat of losing their homes. Pressure on lenders to renegotiate the terms of once sacred written contracts with "teaser freezers" is only a misguided and untimely attempt to shift the blame from their own lack of judgement and ineptitude.
Lender Lobbying Blitz Abetted Mortgage Mess - WSJ.com
