- The Washington Times - Thursday, July 27, 2000

A community advocacy group joined with one of the country's biggest subprime lenders yesterday in announcing a program that will offer $360 million in mortgage financing for inner-city areas.
The Association of Community Organizations for Reform Now (ACORN) and Ameriquest Mortgage Co. of Orange, Calif., make strange bedfellows. ACORN leaders are more frequently found picketing subprime lenders' offices than holding news conferences with them.
But faced with a public outcry about "predatory lending" practices, Ameriquest sat down with ACORN this spring and created a three-year lending program for 10 inner-city neighborhoods, including one in Baltimore, but not one in the District of Columbia.
Ameriquest will provide the financing; ACORN will publicize the program, which starts Sept. 6, through its grass-roots contacts at schools, churches and other community organizations. ACORN, with main offices in Washington, New York and Chicago, is an association of low- and moderate-income community groups.
The lender will enact a set of guidelines for all of its loans to guard against consumer misunderstandings and loan defaults, with a stricter set of rules for the ACORN program.
"The idea is to give a program that redefines how this industry [works]," said Kirk Langs, president of Ameriquest.
The program's loans will contain no prepayment penalties, a 3 percent limit on fees, and no credit life insurance making them cheaper than loans at Ameriquest branches.
The subprime, or high-interest, mortgage market serves individuals and businesses who cannot get traditional loans because of low credit ratings. Regulators, legislators and consumer groups have attacked a subset of the market in the past year that they accuse of using abusive lending tactics.
Most recently, the Federal Reserve announced a series of hearings on the issue in different cities. One will be held today in Charlotte, N.C.
Abusive tactics can include frequent mortgage refinancing, cold calls and nondisclosure of loan terms. Critics say predatory lenders target the elderly, minorities and women.
The effort has given legitimate subprime lenders a bad name, said Wade Henderson, executive director of the Leadership Conference on Civil Rights, at the conference.
That is why those lenders must take action to improve the industry's practices as well as its reputation, he said.
"Regulatory relief is months and perhaps years away. In the interim, there are steps that can and must be taken," said Mr. Henderson, also the co-founder of the Consumer Mortgage Education Consortium.
ACORN took the first step with Ameriquest, which is the nation's 12th-largest subprime lender, according to Inside Mortgage Finance, a Bethesda, Md., research firm. Household Financial Services is the largest, followed by Bank of America Home Equity Group.
Mr. Langs said the industry should adopt consumer safeguards if it wants to remain viable.
His company, which does not disclose profits because it is privately held, has seen income fall in recent years, he said.
Though Ameriquest will lose money on the ACORN program in the short term, it will improve borrowers' payback rate over time, he added.
"From our viewpoint, Ameriquest is taking some business risk by entering into this partnership," said Mike Shea, executive director of ACORN Housing Corp.
ACORN President Maude Hurd said the organization is in talks with other lenders about adopting the safeguards.
ACORN and Ameriquest advocate both voluntary and government regulation of lending to level the playing field. In contrast, groups such as the Mortgage Bankers Association have introduced guidelines and hope that federal regulation will be unnecessary.

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