Jeff Busby looked at his loan documents and could not understand how he and his wife generated an extra $5,500 per month for three years.

Linda Winkler’s mortgage papers included a low-interest loan payoff she wanted to keep.

“They paid off the wrong loan,” Winkler said of her refinance with Ameriquest Mortgage Co. “We didn’t discover it until all the funds were dispersed, but that was just the start of things that went wrong. Instead of a promise that my loan payment would go down, it shot up from $1,368 to $1,800.”

Seattle residents Busby and Winkler are two of thousands of victims nationwide who charged Orange County, Calif.-based Ameriquest, the nation’s largest privately held retail mortgage lender, with deceptive and unfair lending practices. The company, which has more than 270 branches, recently announced a $325 million settlement with 49 states and the District of Columbia — the second-largest mortgage settlement in history. In 2002, Household International reached a similar agreement with 44 states on a $484 million settlement.

Chuck Cross, director of consumer services for the Washington State Department of Financial Institutions, said the case sends a message to the mortgage industry that financial institutions have a responsibility to accurately and fairly inform consumers of what they are receiving. Cross was also instrumental in coordinating the national case against Household International.

“Borrowers should never be put in the situation of having to outsmart their loan officer in order to obtain a fair deal,” Cross said.

While Winkler lost considerable loan fees and other costs, she was able to retain her home when another lender reworked her refinance. Busby, though, lost his residence when he could no longer make the higher payments of his Ameriquest loan. Now 65 and retired, he and his wife, Cheryl, 63, are renting a triplex.

The angle Ameriquest worked on the Busbys appeared in many other cases — fabricated borrower income. Among the charges against Ameriquest was that the company engaged in a pattern of encouraging and facilitating borrower fabrication of non-existent occupations, income sources or amounts of income to support loan applications. These loan applications generally involved “stated income” loans. In the Busby’s case, Cheryl supposedly earned $5,500 a month selling cars, enabling them to afford a $2,472 loan payment, up from their old payment of $1,400. They were promised a $1,000 monthly payment.

“We didn’t have any extra money around,” Jeff said. “We never made more than $25,000 the previous four of five years when we got that loan. We tried for four months to get them to change the information but they just wouldn’t budge.”

As part of the settlement agreement, Ameriquest denied all allegations raised by the states but agreed to mend its ways of doing business. And, many of the victims will not recover all of the money they have lost via the settlement payout. For this reason, some of the damaged parties are going ahead with lawsuits separate and independent of the states’ settlement. However, Ameriquest has stipulated that if a victim accepts funds under the states’ settlement, other legal actions must be dropped.

“There will always be those who second-guess settlements like this,” Cross said. “Some of the best consumer protection minds in the country came together for a full year to achieve this settlement. I believe it is the best settlement we could possibly have at this point in time.”

Examples of other complaints against Ameriquest for some loans made during 1999-2005 include disparaging disclosures, misleading interest rate/discount points, fraudulently inflated appraisals, deceptive prepayment penalties and untimely funding of loans.

Jeff and Cheryl Busby have so many complaints they don’t know where to start.

“Ameriquest was not putting blimps in the air and sponsoring ballgames during the time they made us our loan,” Jeff Busby said. “We lost everything, our home, our nest egg.”

Tom Kelly’s new book, “Cashing In on a Second Home in Mexico: How to Buy, Sell and Profit from Property South of the Border,” was co- written with Mitch Creekmore, senior vice president of Houston-based Stewart International. The book is available in retail stores, on www.Amazon.com and at www.tomkelly.com.

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