Finley v Ameriquest Mortgage Company
Ameriquest Reaches $1.2 Million Settlement With Californians Who Were Forced to Pay Excessive Prepayment Penalties
The parties have reached a tentative settlement, apparently valued at $1.2 million, in an action filed against Ameriquest Mortgage Company on behalf of borrowers who allege that the company miscalculated the amounts of the borrowers' prepayment penalties for paying off mortgages that were taken out between September 1998 and October 2001 on California property. The action alleged that the company's actions violated California's Unfair Business Practices Act. The claims deadline has been extended from December 9, 2003, to July 30, 2004. Claims must be submitted by the new date to be considered valid.
The class is composed of all persons (1) who signed promissory notes with Ameriquest secured by real property in California; (2) who either paid a prepayment penalty when the loan was paid off or will have to do so when it is paid off; and (3) whose promissory notes for such loans contain the "Borrower's Right to Prepay" paragraph as shown in either of the following two paragraphs:
"I may repay this Note at any time as provided for in this paragraph. If, within five (5) years from the date of the execution of the Mortgage or Deed which secures this Note, I make a voluntary or involuntary prepayment during any consecutive twelve (12) month period of any amount in excess of twenty (20%) of the original principal amount of this Note, I agree to pay a prepayment charge equal to six (6) months advance interest on all amounts paid in excess of my scheduled monthly payments that have come due as of the date of prepayment."
or
"I may repay this Note at any time as provided for in this paragraph. If, within the first Three (3) year(s) from the date of the execution of the Mortgage or Deed which secures this Note, I make a voluntary or involuntary prepayment during any consecutive twelve (12) month period of any amount in excess of twenty percent (20%) of the original principal amount of this Note, I agree to pay a prepayment charge equal to six (6) months advance interest, calculated at the rate in effect at the time of prepayment, on all amounts paid in excess of my scheduled monthly payments that have come due as of the date of prepayment."
The class is restricted to persons who entered into loans with Ameriquest and does not include persons who assumed these ans or bought property subject to these loans from the persons who actually borrowed the money from Ameriquest.
The action alleged that the prepayment penalty had not been calculated based on the amount owing at the time of payoff, but by using some other method. It also alleged that the prepayment penalty that the borrowers paid was not calculated on the original interest rate.
To determine if you may participate in this settlement, you should examine your promissory note from Ameriquest. The "borrower's right to prepay" paragraph appears on the second page of the note.
Eligible participants whose loans have been paid off and who submit valid claims will receive 35 percent of the difference between (a) the prepayment charge they paid and (b) the scheduled balance at time of payoff minus the total of the scheduled monthly payments which had come due on the loan through the date of payoff, multiplied by the loan interest rate at the time of payoff divided by two.
Example: Say you had a $150,000 Ameriquest loan and monthly payments of $1,207.00. You pay off the loan after 24 monthly payments were due. At the time the loan was paid off it had an interest rate of 9 percent. The balance at time of payoff was $147,854 and Ameriquest charged a prepayment penalty of $6,653. The refund would be based on taking the total of the 24 monthly payments of $1,207.00 which had come due on the loan (totaling $28,968) and deducting that amount from the scheduled balance at time of payoff of $147,854 which leaves a balance of $118,890. That amount would be multiplied by 9 percent and then divided by 2 giving a prepayment penalty of $5,350 If this were your loan, you would receive a settlement check for 35 percent of the difference between $6,653 and $5,350 or $456.
Note that the refund is based on the prepayment charge actually paid by the borrowers. If, based on this illustration, the borrower paid a prepayment penalty of $6,000, the Class members would receive a settlement check for 35 percent of the difference between $6,000 and $5,350 or $227.50.
If your Ameriquest loan has not been paid off, you will receive a certificate which must be submitted to Ameriquest within 60 days of the date that your Ameriquest loan is paid off, if you are to incur a prepayment charge at that time. If you do so, you will receive a refund that will be calculated based on the prepayment charge actually paid at the time of payoff. Note that the time period for which a prepayment penalty could be charged on loans made through September 2000 is five years and for loans written after that date is three years. You should examine your promissory note to see whether it has a three-year or a five-year prepayment penalty.
In order to obtain your refund or certificate, you must complete the claim form that is available at the settlement website and include any available documentation that indicates (1) that your loan was paid off and how much the prepayment penalty was, or (2) that you will be subject to a prepayment penalty when you do pay off your loan.
If you are entitled to a refund, the settlement check will be made payable jointly to all persons who signed the Ameriquest loan except that: (1) If any person who executed the loan is deceased the check will be made payable to the surviving borrower(s); (2) if all borrowers who executed the loan are deceased, the check will be made payable to the estate of the last surviving borrower or to all the heirs of the last surviving borrower, or (3) if the borrowers are divorced, separate checks will be made payable 50 percent to each borrower, if these borrowers so choose.
Please note that the checks will be mailed only once. Proceeds from checks returned or not cashed within six months will be made payable to a non-profit organization designated by the court.
