Giant Ameriquest cut a wide swath in sub-prime mortgage market. They were the sponsor of the SuperBowl half-time show and the recent Rolling Stones tour. On the darker side, they agreed to pay about $300 million dollars in fines to the 49 states which had accused them of bilking their customers through unethical practices. Now they have announced that they are completely changing their business model. They are closing all 229 retail branches and laying off over 3,800 employees. Their new business model is to solicit loans over the Internet.
One suspicion is that the branches could only be profitable when they were gouging clients. Without that extra income, the operation becomes unprofitable. Another possibility is that the 3,800 employees were making good money when they could gouge customers, but wouldn’t work under ethical constraints that cut their income. If they all left, I don’t know where you’d immediately find 3,800 new people with higher ethical standards.
The sub-prime loan business has attracted some pretty skuzzy people, but it’s hard to believe that you can’t run a profitable business AND be ethical at the same time. Sadly, that may be the case. It is possible that the rest of the industry is just like this, but they haven’t been caught.
This demonstrates fairly graphically the seamier side of the mortgage business. Smart borrowers make sure about the ethics of the companies they do business with.
What do you think of your mortgage company’s ethics? Have you worked with Ameriquest? Share your feedback in the comments section below.