During the housing boom, the subprime industry succeeded at more than just writing mortgages. It also shot down efforts by some states to curtail risky lending to borrowers with spotty credit.
Ameriquest Mortgage Co., until recently one of the nation’s largest subprime lenders, was at the center of those battles. Working with a husband-and-wife team of Washington lobbyists, it handed out more than $20 million in political donations and played a big role in persuading legislators in New Jersey and Georgia to relax tough new laws. Those victories, in turn, helped blunt efforts by other states to crack down on reckless lending, critics of the industry contend.
Home loans made by Ameriquest and other subprime lenders are defaulting now in large numbers, roiling global credit markets and sparking debate about whether regulators and lawmakers should have anticipated the mess and taken action. A close look at Ameriquest’s lobbying and political donations shows how the subprime industry maneuvered to defeat legislation that might have contained some of the damage.
Executives at Ameriquest, based in Orange, Calif., acknowledge that the company lobbied heavily against state lending restrictions, but say that other subprime lenders did so as well. In fact, a host of subprime lenders and banking trade groups, including Citigroup Inc., Wells Fargo & Co., Countrywide Financial Corp. and the Mortgage Bankers Association, spent heavily on lobbying and political giving.
Some of the giving by Ameriquest executives and associates was high-profile. President Bush received more than $200,000 for his 2004 re-election campaign, and Ameriquest founder Roland Arnall and his wife, Dawn, contributed more than $5 million to political organizations that backed the president. Last year, President Bush appointed Mr. Arnall ambassador to the Netherlands, and his wife took over as chairman of Ameriquest’s parent company. California Gov. Arnold Schwarzenegger’s campaigns received at least $1.4 million, along with stacks of tickets to a Rolling Stones concert that were used to lure big donors.
…Ameriquest was founded by Mr. Arnall in 1979 as Long Beach Savings & Loan. He later shed all of the thrift’s operations except its retail-mortgage unit, which he renamed Ameriquest. During the refinancing boom of the 1990s, Ameriquest became a player in the business of lending to low-income homeowners. The company persuaded many homeowners to take cash out of their houses by refinancing them for larger amounts than their existing mortgages. Many of the new loans carried relatively high interest rates.
Roland Arnall is Shalhevet’s biggest donor.
