7 Property Flipping Complaint

7 Property Flipping Complaint

Circuit Court of the City of St. LouisState of Missouri

CitizenVoylesPesekRobinsonAxley, andScott, Plaintiffs v

Ameriquest Mortgage CompanyServe Registered Agent:National Registered Agents300 B East High Street.Jefferson City, MO 65101

Argent Mortgage CompanyServe Registered Agent:National Registered Agent, Inc.300 B East High StreetJefferson City MO 65101

Netco, Inc.Serve Registered Agent:Patrick Dignam401 Fountain LakesSt. Charles, Missouri 63301

Bliss Associates, Inc. Serve Registered Agent: Robert M. Beachy911 Main, Suite 2400Kansas City, Missouri 64105

Ms. HesterServe at:[street address]

Ms. ThomasServe at:[street address]

)))))))))))))))))))))))))))))))))))))))))

Cause No.:

Division:

Jury Trial Demanded.

Petition

1. The Plaintiffs are individuals residing in the City of St. Louis, Missouri. 2. The Plaintiffs each refinanced their homes with Defendants after being contacted by

Defendants.3. Defendant Ameriquest Mortgage Company (“Ameriquest”) is a privately held

corporation organized under the State of Delaware with its principal place of business in Orange, California. Ameriquest is the nation’s largest privately held subprime lender. Ameriquest is a wholly owned subsidiary of privately held Ameriquest Capital Corporation.

4. Defendant Ameriquest is a duly organized Delaware corporation in good standing with itsprincipal place of business in the State of California. Defendant is qualified to do business in the State of Missouri.

5. Defendant Argent Mortgage Company (“Argent”) is a Limited Liability Company duly organized under the laws of Delaware with its principal place of business in Orange, California. Argent is a wholly owned subsidiary of Ameriquest.

6. Netco, Inc. (“Netco”) is a business incorporated in Illinois. Netco is registered to do business and doing business in Missouri.

7. Netco served as a settlement agent on one or more of the loans described in this Petition.8. Defendant Bliss Associates, Inc. (“Bliss”) is a Missouri corporation in good standing that

conducts real estate appraisals. 9. Bliss served as an appraiser on or more of the loans described in this Petition.10. Hester and Thomas are Missouri notary publics and Missouri citizens who conduct their

notary work in Missouri. 11. Hester and Thomas served as notaries and provided additional services with regard to one

or more of the loans described in this Petition.

Jurisdiction, Venue and Jury Demand

12. The Circuit Court of St. Louis City has subject matter jurisdiction over this matter because the causes of action arose in the City of St. Louis.

13. The Circuit Court of St. Louis City has personal jurisdiction over the Defendants becausethey regularly transact business in the City of St. Louis, Missouri.

14. Venue is proper in the City of St. Louis because the cause of action arose in the City of St. Louis.

15. Plaintiffs demand a jury trial regarding all issues raised by this Petition.

General Allegations

16. Ameriquest and Argent have been providing mortgages to borrowers who have impaired credit or who are unable to obtain credit in the prime market and who, therefore, must turn to the “subprime” market. Borrowers in this “subprime” market tend to pay mortgage rates that are between one-half point and four points above the prime rate.

Page 2

17. During 2004, subprime home lending became a $400 billion business, up 98% from 2003. Unfortunately, the growth of the subprime market has corresponded with an increase in abusive lending that has become a crisis for American families. One in five subprime refinance loans end up in foreclosure.1 Nationally, subprime loan originations increased more than nine fold--from $35 billion to about $332 billion, in just 9 years (1994–2003).2

18. To refinance a mortgage borrowers like Plaintiffs are required to attend closings where they are faced with a large and intimidating stack of complicated documents, but given little or no time to meaningfully read or understand them. If borrowers would actually tryto read all of the documents given to them at closing, it would take all day. For practical purposes, borrowers like Plaintiffs have no choice but to trust and rely upon the representations and interpretations those who prepare the documents and those who attend the closing.

19. Defendants did not close the loans of these Plaintiffs at title companies or other types of offices used by reputable loan companies. Instead, they closed these loans at places such as Denny’s Restaurants or at the homes of borrowers, failing to send any truly knowledgeable representative regarding the terms and conditions of the loans.

20. At the direction of Defendants, the loan refinancing closings of these Plaintiffs were attended only by notaries (such as the two notaries named in this Petition), in lieu of knowledgeable closing agents. The borrowers saw these notaries as presiding over their complicated refinancing process.

21. Ameriquest is the nation’s largest privately held subprime lender. Because Ameriquest is privately held, it is not accountable to shareholders, nor constrained by laws or regulations imposed on public companies.

22. The United States Department of Housing and Urban Development (“HUD”) has defined predatory lending as lending “involving deception or fraud, manipulation of borrowers through aggressive sales tactics, or taking unfair advantage of a borrower’s lack of understanding about loan terms . . . These practices are often combined with loan terms that, alone or in combination, are abusive or make the borrower more vulnerable to abusive practices.”

23. New York Attorney General Elliot Spitzer has stated: "Predatory lending results in substantial injury to our society's most vulnerable consumers and undermines communities by stripping homeowner equity and hiking foreclosures.”

24. HUD and the United States General Accounting Office (“GAO”) have identified various practices that constitute predatory lending. Since predatory lenders are constantly developing new techniques to take advantage of borrowers, any enumeration of predatorypractices necessarily will be incomplete. Nevertheless, it is generally accepted by the lending industry and government agencies that monitor that industry that “predatory lending practices” include the following practices, which will collectively be referred to as “Predatory Lending Practices”:

a. charging excessive fees, points and interest rates unrelated to the borrower’s credit/risk profile;

b. misleading a borrower about the borrower’s credit/risk profile to steer the borrower to a high-cost loan unjustified by the borrower’s true profile;

1 http://www.responsiblelending.org/promos/UNCforeclosure.cfm 2 http://www.responsiblelending.org/offsite/index.cfm?id=5

Page 3

http://www.responsiblelending.org/offsite/index.cfm?id=5

http://www.responsiblelending.org/promos/UNCforeclosure.cfm

c. lending without regard to borrowers’ ability to repay; d. causing borrowers to refinance loans multiple times over a short period of time

without any economic gain to the borrower (“loan flipping”);e. imposing excessive prepayment penalties that trap borrowers into predatory loans;f. engaging in aggressive, high-pressure and/or misleading sales tactics; g. making misrepresentations or otherwise misleading borrowers about loan terms; h. falsifying loan documents; and i. targeting low-income, elderly and minority borrowers for predatory lending

tactics.

25. A prepayment penalty is a fee required by the lender when borrowers pay off a mortgage loan early. In the subprime mortgage market, where borrowers tend to have less-than-perfect credit, an abusive prepayment penalty can trap them in a high-interest loan even after they improve their credit rating. When borrowers qualify for a better loan, even several years later, they are charged a large fee to pay off their old loan. This penalty is seldom imposed in the conventional mortgage market.3

26. Ameriquest regularly charged its own customers prepayment penalties on loans for refinancing. A short time after closing these refinancing loans, Ameriquest solicited its own customers to again refinance their loans. As part of the subsequent refinancing, Ameriquest regularly charged its own customers substantial prepayment penalties.

27. Loan “flipping” has also been described as follows: Flipping occurs when a lender refinances a loan to generate fee income without providing any significant benefit to the borrower. Flipping quickly drains borrower equity and increases monthly payments. Defendants Ameriquest and Argent have used high-pressure efforts to persuade Plaintiffs to refinance their loans shortly after the Plaintiffs had already refinanced their homes, thereby “flipping” those earlier loans.

28. Predatory lenders use aggressive high-pressure sales and marketing techniques to lure in victims for their Predatory Lending Practices. These techniques include repeated direct mailings, telemarketing (sometimes involving multiple daily calls), and in-home solicitations.

29. Predatory lenders bait borrowers by promising “savings” from debt consolidation or the option to “cash out” a portion of a borrower’s home equity. Unbeknownst to the borrowers, most of the “cashing out” goes right into the lender’s pocket in the form of fees and excessive interest.

30. Predatory lenders also engage in the practice of persuading financially troubled individuals and families that the solution to their problems is to consolidate their unsecured debt into their home mortgage.

31. Another common predatory lending practice involves inflating property appraisals. When lenders inflate appraisals and thereby induce borrowers to enter loans that exceed the value of their homes, borrowers become trapped in their loans. Furthermore, borrowers lose much or all of the equity in their homes when they assume mortgages for more than the value of their property, precluding further refinancing even if their credit improves. This practice is sometimes referred to as “putting borrowers under water.”

32. Predatory lending practices condemn homeowners to a cycle of refinancing, foreclosure, economic ruination, and segregation from conventional, mainstream credit. On a larger

3 See http://www.responsiblelending.org/pdfs/ib008-PPP_in_Subprime_Loans-0604.pdf

Page 4

http://www.responsiblelending.org/pdfs/ib008-PPP_in_Subprime_Loans-0604.pdf

scale, when predatory lending practices are concentrated in certain neighborhoods-as theyfrequently are-communities suffer from destabilization through the loss of equity, distressed and vacant properties, and stifled economic development. This causes the depression of property values and makes entire neighborhoods pay the price for the wrongful practices of unscrupulous lenders.

33. Defendants Ameriquest and Argent have a long history of willfully and maliciously engaging in Predatory Lending Practices. See attached Exhibit C.

34. In or about February 2005, the banking department of the State of Massachusetts suspended Ameriquest’s license to do business in the state.

35. Defendants Ameriquest and Argent have a history of charging excessive points and fees, which are not directly reflected in interest rates. Because these costs can be financed, theyare easy to disguise or downplay. On competitive loans, fees below 1% of the loan amount are typical. Defendants commonly charge fees totaling more than 5% of the loan amount.

36. For many years, Ameriquest and Argent have known that the loan process is confusing and that they customer is thus entitled to full and timely disclosure throughout the process.

37. On February 6, 2002, Mr. Bass, then the Senior Executive Vice President of Ameriquest, appeared before the Committee on Banking Housing and Urban Affairs on the United States Senate. Mr. Bass testified as follows:

The terms of a loan contract should always be a matter of negotiation between theborrower and the lender. But in order for this negotiating process to produce fair results, borrowers must be fully informed about the nature of the products being offered. Only when armed with the understanding of the terms and commitments involved in the transaction can the borrower make his or her own decision about whether or not to accept a loan and upon what terms.

38. In this same testimony, Mr. Bass claimed that Ameriquest did not solicit to refinance its loans within two years of first loan’s origination. Ameriquest and Argent repeatedly broke this promise.

39. Bass further testified that Ameriquest provided each customer with “simple-to-read disclosure documents that clearly identify all of the important terms of the loan using phrases such as: your interest rate is; you have a prepayment charge of; and your total fees are . . .”

40. Defendants Ameriquest and Argent have not focused their marketing efforts toward people trying to buy a home. Instead, Ameriquest and Argent have targeted people who already own homes with offers to refinance the loans they already have.

41. In 2000 or 2001, the FTC conducted an investigation of Ameriquest. The FTC closed its investigation in February 2001, only after Ameriquest promised to improve its lending policies and practices through adoption of Ameriquest “Best Practices.” See attached Exhibit B.

42. In July 2000, partly as a result of a campaign by ACORN (Association of Community Organizations for Reform Now—ACORN is the nation’s largest community organization of low- and moderate-income families, working together for social justice and stronger

Page 5

communities4), Ameriquest adopted its so-called “Best Practices.” Ameriquest’s “Best Practices” policy provides in pertinent part:

We believe consumers should (1) receive clear and timely disclosures of the terms of a proposed loan and their options; (2) have adequate time to evaluate and negotiate those terms and; (3) have the ability to obtain the advice of independent advisors as to whether the loan is one they should accept . . .

43. As part of these “Best Practices,” Ameriquest agreed that it would not refinance its loans within 24 months of their origination. In this much publicized July 2000 agreement with ACORN Ameriquest specifically promised that it would not charge any prepayment penalties in the St. Louis Market for three years. See attached Exhibit A. In its agreement with Acorn Ameriquest also promised the following:

a. No prepayment penaltiesb. Full and timely disclosed loan terms and conditions, in plain English.c. A prohibition against flipping its loans through frequent efforts to persuade

borrowers to refinance loans; 44. Despite Ameriquest’s publication of the “Best Practices” and frequent references to the

policy in public statements, Ameriquest has often failed, and continues to fail, to live up to its promises.

45. Defendants employ “bait and switch” tactics to induce borrowers into entering predatory loans. To lure borrowers in, Defendants promise loans with “no costs” up front, fixed interest rates, all-inclusive low monthly payments and/or particular fees and interest rates.When the paperwork is presented to the customers for signature, however, the terms are different from those promised.

46. Defendants were and are engaged in unfair, unlawful and deceptive business practices in soliciting, inducing and closing residential loan transactions in Missouri and elsewhere.

47. Defendants charged unfair and excessive fees and expenses that bore no relation to the services rendered or to any other legitimate considerations and misled borrowers about those fees and expenses.

48. Ameriquest and Argent focus their efforts on vulnerable consumers, rewarding its workers for refinancing the loans of people less likely to understand or appreciate the dangers of predatory lending.

49. According to the Los Angeles Times (Feb 4, 2005), former employees of Ameriquest indicate that the company’s growth:

has been generated more by hard-sell tactics than by slick marketing. They described 10- and 12-hour days punctuated by ‘power hours’ -- nonstop cold-calling sessions to lists of prospects burdened with credit card bills; the goal was to persuade these people to roll their debts into new mortgages on their homes. Employees who put up big numbers, they said, were rewarded with trips to Hawaii and the Super Bowl and, in some cases, with $100,000-plus salaries. No matter how many loans they peddled, however, the pressure rarely eased . . .”

50. Due to the predatory lending and unfair practices summarized above and described in greater detail below, borrowers who entered loans with Defendants were likely to suffer

4 http://www.acorn.org/index.php?id=2703

Page 6

http://www.acorn.org/index.php?id=2703

foreclosure at a much higher rate than borrowers with loans from other subprime mortgage lenders.

51. Despite numerous lawsuits, government investigations and community group actions aimed at stopping the above practices of Ameriquest and Argent, and despite the promisesof Ameriquest and Argent to refrain from engaging in the above practices, Defendants ranoperations in Missouri that enabled, encouraged and rewarded predatory loan practices.

52. Ameriquest primarily makes refinance loans to homeowners seeking to consolidate creditcard and other debt and generate overall monthly savings. After refinancing with Ameriquest, however, consumers were often trapped in mortgages they could not afford, and were left with little or no equity in their homes.

Relevant Missouri Statutes

Missouri Merchandising Practices Act, RSMo §407.020.

53. § 407.020.1 RSMo. provides:

407.020. 1. The act, use or employment by any person of any deception, fraud, false pretense, false promise, misrepresentation, unfair practice or the concealment, suppression, or omission of any material fact in connection with the sale or advertisementof any merchandise in trade or commerce . . . in or from the state of Missouri, is declared to be an unlawful practice . . .

54. The Court is allowed to award additional sums as punitive damages, attorney fees and equitable relief as provided in RSMo § 402.025:

Any person who purchases or leases merchandise primarily for personal, family or household purposes and thereby suffers an ascertainable loss of money or property, real or personal, as a result of the use or employment by another person of a method, act or practice declared unlawful by section 407.020, may bring a private civil action in either the circuit court of the county in which the seller or lessor resides or in which the transaction complained of took place, to recover actual damages. The court may, in its discretion, award punitive damages and may reward to the prevailing party attorney's fees, based on the amount of time reasonably expended, and may provide such equitable relief as it deems necessary or proper.

55. RSMo § 408.036 provides that a lender that charges a prepayment penalty, in excess of two percent of the balance of the loan, is in violation of Mo. Rev. Stat. § 408.036. Section 408.036 states:

[N]o prepayment penalty shall be charged or exacted by a lender on any promissory note or other evidence of debt secured by residential real estate when the full principal balanceis paid after five years from the origination date and prior to maturity; and in no event shall any prepayment penalty exceed two percent of the balance at the time of prepayment . . . .

Page 7

56. Section 408.036 sets forth the public policy of the State of Missouri and it is an unfair and deceptive practice for any mortgage company to violate the provisions of Section 408.036.

57. Section 408.052 RSMo provides:

No lender shall charge, require or receive, on any residential real estate loan, any points or other fees of any nature whatsoever… whether from the buyer or the seller or any other person, except that the lender may charge bona fide expenses paid by the lender to any other person or entity...

58. Section 408.052 RSMo allows for the recovery of double damages and attorney’s fees against those who violate its provisions:

If any points or fees are charged, required or received, which are in excess of those permitted by this section, or which are not returned upon demand when required by this section, then the person paying the same points or fees or his or her legal representative may recover twice the amount paid together with costs of the suit and reasonable attorney's fees, provided that the action is brought within five years of such payment.

59. Furthermore, violation of Section 408.052 RSMo 2005 is a criminal act:

Any lender who knowingly violates the provisions of this section is guilty of a class Bmisdemeanor.

60. 15 CSR 60-8.020 provides that:

An unfair practice is any practice which either-1. Offends any public policy as it has been established by the Constitution, statutes or common law of this state, or by the Federal Trade Commission, or its interpretive decisions; or2. Is unethical, oppressive or unscrupulous . . . and . . . presents a risk of, or causes, substantial injury to consumers.


It is an unfair practice for any person in connection with the advertisement or sale of merchandise to—(A) Take advantage of a person's physical or mental impairment or hardship caused by extreme temporary conditions, and charge a price substantially above the previous market price of the merchandise in seller's trade area;


1) It is an unfair practice for any person in connection with the advertisement or sale of merchandise to use or employ any duress, or undue influence (see section

Page 8

400.2-103(1)(b), Restatement, Second, Contracts sections 205, 364).


(1) It is an unfair practice for any person in connection with the sale of merchandise to engage in any unconscionable act or practice, or to use any unconscionable contract or contract term.(2) It is unconscionable to take advantage of an unequal bargaining position and obtain a contract or term which results in a gross disparity of values exchanged.

64. 15 CSR 60-9.060 provides that a:

2) False promise is any statement or representation which is false or misleading as tothe maker's intention or ability to perform a promise, or likelihood the promise will be performed.


(1) It is a misrepresentation for any person in connection with the advertisement or sale of merchandise to omit to state a material fact necessary in order to make statements made, in light of the circumstances under which they are made, not misleading.


(1) Concealment of a material fact is any method, act, use or practice which operates to hide or keep material facts from consumers.(2) Suppression of a material fact is any method, act, use or practice which is likely tocurtail or reduce the ability of consumers to take notice of material facts which are stated.(3) Omission of a material fact is any failure by a person to disclose material facts known to him/her, or upon reasonable inquiry would be known to him/her.(4) Reliance and intent that others rely upon such concealment, suppression or omission are not elements of concealment, suppression or omission as used in section 407.020.1., RSMo.

Violations of §407.020 and Per Se Violations of §407.020

67. At all times relevant, each of the Defendants listed in this Petition acted as the agent, employee and servant of the other Defendants within the scope and course of the agency and employment, and

68. Each of the defendants acted in concert with each other Defendant, in each of the actions and omissions set forth in this Petition, as part of a common scheme or plan.

69. At all times relevant, each of the Defendants listed in this Petition acted together so as to constitute a civil conspiracy regarding all acts and omissions set forth in this Petition.

Page 9

70. In violation of §407.020, Defendants used and employed deception, fraud, false pretense, false promise, misrepresentation, unfair practice and the concealment, suppression, or omission of material facts in connection with the sale or advertisement of real estate loansregarding each of these plaintiffs, in that defendants:

(Prepayment Penalties)

a. Solicited Plaintiffs to refinance their home loans at a time when Defendants knew that Plaintiffs would incur expensive prepayment penalties.

b. Initiated contact and aggressively solicited Plaintiffs to refinance their homes at a time when Defendants knew that Plaintiffs would incur expensive prepayment penalties.

c. Failed to provide full disclosure regarding the true cost of the loans, including the cost of prepayment penalties, fees and other loan costs.

d. Failed to itemize the true costs of the prepayment penalties that would be incurredby Plaintiffs on the refinancing paperwork, including on the HUD-1 form.

e. Failed to disclose anywhere, on the loan paperwork or in writing, the large amounts of money that the Plaintiffs would be incurring as prepayment penalties, where that information was easily available to Defendants in that they financed Plaintiffs’ existing loans.

f. Failed to disclose to the Plaintiffs that expensive prepayment penalties could be avoided entirely by waiting relatively few months before refinancing.

g. Imposed prepayment penalties for the purpose and with the effect of preventing borrowers from refinancing on better terms with other lenders, while failing to advise the Plaintiffs of the effect of these penalties.

h. Provided its sales personnel incentives to include prepayment penalties or other fees and charges in the mortgages.

i. Failed to disclose the amount of the substantial prepayment penalties to Plaintiffs as finance charges that constituted costs of the credit.

(Other Violations)

j. Engaged in predatory lending practices with the Plaintiffs.k. “Flipped” loans that Defendants themselves had previously made to Plaintiffs. l. Violated 15 CSR 60-8.020 by their use of the following techniques: flipping

Plaintiffs’ loans, using oppressive and intense sales pitches, using statements of material falsehood, concealing fees, penalties and points charged in the loans using unethical practices, and otherwise employing the oppressive and unscrupulous practices set forth throughout this Petition.

m. Charged excessively high and/or false points, closing costs, origination fees, and service charges in order to bloat the loans without explaining or disclosing these junk fees to Plaintiffs.

n. Falsely claimed to the Plaintiffs that refinancing their home loans would save them money.

o. Presented incomplete or misleading information related to the cost of the loans in comparison with the Plaintiffs’ existing loan obligations.

Page 10

p. Failed to disclose significant finance charges that the Plaintiffs incurred.q. Promised the Plaintiffs that they would be “saving money” to refinance, but failed

to disclose that Defendants’ tactics amounted to equity-stripping.r. Failed to advise Plaintiffs of the absurdity of refinancing the entire amount of

their existing mortgages under the terms offered by Defendants when Plaintiffs could instead take out a separate loan for any additional amount of money the Plaintiffs desired for paying off other debts or as cash.

s. Failed to disclose to Plaintiffs that their new loans would involve confusing and unfair adjustable rates that would likely rise, but could never be lower than the terms of the original loan.

t. Falsely promised a new loan with a lower interest rate, only to actually provide anadjustable rate loan, the interest rate of which will likely exceed the interest rate the homeowner’s original loan.

u. Failed to timely provide legally required and accurate good faith estimates to Plaintiffs, presenting only inaccurate information which increased between the time of the Good Faith Estimate and the closing.

v. Promised Plaintiffs discounted loan rates in exchange for the payment of thousands of dollars for “discount points” but failed to provide any discounted interest rates in exchange for this fee.

w. Unilaterally charged consumers “discount points” that resulted in higher commissions for sales personnel but failed to yield any benefits to Plaintiffs.

x. Improperly calculated the escrow funds to which the Plaintiffs were entitled upon closing the second loan with Defendants.

y. Marketed and sold Plaintiffs mortgages in a manner intended to hide the true costsfrom borrowers.

z. Failed to disclose to the Plaintiffs that they were being charged “Yield Spread Premiums (YSPs): cash bonuses that Defendants agreed to receive from a lender for placing borrowers in a loan with a higher interest than the lender would accept. These kickbacks provide Defendants a strong incentive to charge borrowers a higher interest rate when they could qualify for a less expensive loan. The effect of YSPs was to drain equity from the Plaintiffs.

aa. Provided only a notary to preside over the closings, though such notaries were notqualified to provide meaningful information regarding the Defendant’s complicated loan documents.

bb. Presented less favorable loan terms to borrowers only at closing so as to exert pressure to accept the unfavorable loan;

cc. Concealed the interest rate and loan costs during the application process.dd. Failed to provide full written and oral disclosures regarding interest rates,

discount points and prepayment penalties, and to provide important information regarding consumers' pricing options.

ee. Engaged in unlawful acts and omissions that violated the highly published policies and advertising of Ameriquest and Argent.5

ff. Inflated the values of borrowers' homes and overstated appraisals.gg. Violated Section 408.052 RSMo 2005 by charging fees and points that were not

bona fide expenses paid by Defendants.

5 Ameriquest publishes its “Best Practices” at http://www.ameriquestmortgage.com/press.html?ad=ameriquest.com

Page 11

http://www.ameriquestmortgage.com/press.html?ad=ameriquest.com

hh. Violated 15 CSR 60-8.030 by taking advantage of temporary financial hardships, some of which were caused by Defendants when Plaintiffs took on financial burdens in anticipation of finalizing their loan with Defendants, in order to materially change the terms of loans contemplated with Plaintiffs, in such a way that Plaintiffs’ interest rates were adversely affected, fees were increased and equity was reduced, immediately prior to the closing of loans with Plaintiffs.

ii. Violated 15 CSR 60-8.050 by using an intense sales pitch in which Defendants promised to save Plaintiffs money, reduce their interest rates, and preyed upon Plaintiffs’ fears of variable interest rates.

jj. Violated 15 CSR 60-8.080 by taking advantage of Plaintiffs’ financial hardships, some of which were caused by Defendants when Plaintiffs took on financial burdens in anticipation of finalizing their loan with Defendants, in order to materially change the terms of loans contemplated with Plaintiffs, in such a way that Plaintiffs’ interest rates were adversely affected, fees were increased and equity was reduced, immediately prior to the closing of loans with Plaintiffs.

kk. Violated 15 CSR 60-9.060, 9.090 and 9.110 by falsely promising to save Plaintiffsmoney, misrepresenting the fees and charges that would be incurred by Plaintiffs in refinancing their loan, and by concealing the material fact of an excessive prepayment penalty that would be charged to Plaintiffs for refinancing their loan.

ll. Further violated 15 CSR 9.090 and 9.110 by failing to disclose that plaintiffs could avoid paying a prepayment penalty by waiting a certain number of months before refinancing their loans.

(Failure to Supervise/Control Agents)

mm. Created a hyper-aggressive, high pressure sales culture that encouraged its sales personnel to engage in deceptive conduct.

nn. Negligently supervised its employees, breaching its duty of reasonable care to assure that employees and agents comply with all applicable laws.

oo. Failed to train its employees and agents to comply with all applicable laws pertaining to real estate mortgages.

pp. Failed to use independent loan closers.

71. Defendant Notaries further committed unfair practices in violation of §407.020 as follows:

a. They improperly and misleadingly placed themselves into a position where they were the only representatives of the various Defendants present at the loan closings they attended, that they would be seen as representatives of the other Defendants, that they would be seen as presiding over and directing the closings of these illegal loans, and that the Plaintiffs would look to the notaries to explain the loan paperwork to them or give them reassurance and necessary advice duringthe closing.

b. These notaries brought the loan paperwork to the loan closings they attended and directed the Plaintiffs how and where to sign the paperwork regarding these unlawful loans.

Page 12

c. These notaries knew or should have known of the highly-publicized unlawful activities of Ameriquest and Argent prior to agreeing to assist in the closing of these loans. They also knew or should have been known that the loan closings at which they appeared were for the purpose of flipping loans.

d. These notaries knew or should have known that their presence would be misleading to the Plaintiffs, who expected Ameriquest or Argent (or a knowledgeable representative) to be present to answer questions at the closing).

e. These notaries were the only persons other than the Plaintiffs present at closings, during which Plaintiffs were directed to sign important documents indicating that various provisions in the documents had been explained to Plaintiffs or that Plaintiffs had an opportunity to fully understand said documents.

f. The notaries, having improperly put themselves in the position as the person presiding over or directing the loan closings, directed the Plaintiffs to hurry through the process in order that they could attend other loan closings at other locations.

g. The notaries were aware that Ameriquest and Argent had failed to provide a knowledgeable representative at these loan closings, yet allowed themselves to be seen as people who were qualified to close the loans.

72. Defendant Netco further committed unfair practices in violation of §407.020 by: a. Providing closing and notary services under the conditions and circumstances

described throughout this Petition.b. Failing to oversee the loan closings described in this Petition.c. Conspiring to close loans with consumers in high pressure situations.d. Failing to provide independent loan closers.e. Failing to properly train or supervise those it sent to preside over loan closings.

73. Defendant Appraiser further violated §407.020 as follows:a. In failing to conduct a proper appraisal regarding the relevant property.b. By inflating the values of borrowers' homes and overstating the appraised values

of the homes in order to facilitate a loan that Plaintiffs could not afford.c. By inflating the value of Plaintiffs’ homes in such a way that Plaintiffs lost the

equity that they had built up in their homes when they refinanced.d. By charging a fee or fees for an appraisal that were grossly excessive.e. By misleading Plaintiffs as to the value of their homes such that they thought they

were more credit-worthy than they actually were.74. Plaintiffs purchased loans and loan services from Defendants for personal, family or

household purposes.75. As a direct and proximate result of the violations of §407.020 set forth above and in the

sections of this Petition pertaining to the individual Plaintiffs, Plaintiffs suffered ascertainable losses of money and other actual damages.

76. Due to the unlawful acts and omissions of the Defendants, Plaintiffs were caused to purchase refinancing for their homes at oppressive interest rates and with excessive fees that were not properly disclosed to Plaintiffs.

77. Pursuant to §407.025, these Plaintiffs are each entitled to recover their actual damages, punitive damages and attorney’s fees for Defendants’ violation of §407.020, and to equitable relief.

Page 13

78. Plaintiffs incorporate each of the above allegations into each of the following Counts of this Petition.

Page 14

Count I..........................................................................................................................................23Joseph and Octavia Citizen - Chapter 407 Violations and Per Se Violations........................23Count II.........................................................................................................................................26Joseph and Octavia Citizen – Chapter 408...............................................................................26Count III.......................................................................................................................................26Joseph and Octavia Citizen – Common Law Fraud.................................................................26Count IV.......................................................................................................................................29David and Stella Voyles – Chapter 407 Violations and Per Se Violations..............................29Count V.........................................................................................................................................31David and Stella Voyles – Chapter 408......................................................................................31Count VI.......................................................................................................................................31David and Stella Voyles – Common Law Fraud.......................................................................31Count VII......................................................................................................................................34Dan and Kathy Pesek – Chapter 407 Violations and Per Se Violations..................................34Count VIII....................................................................................................................................35Dan and Kathy Pesek – Common Law Fraud..........................................................................35Count IX.......................................................................................................................................38Glen & Janet Robinson – Chapter 407 Violations and Per Se Violations..............................38Count X.........................................................................................................................................40Glen & Janet Robinson – Common Law Fraud.......................................................................40Count XI.......................................................................................................................................42Daniel & Nancy Axley – Chapter 407 Violations and Per Se Violations.................................42Count XII......................................................................................................................................44Daniel & Nancy Axley – Common Law Fraud.........................................................................44Count XIII....................................................................................................................................46Bryan Scott – Chapter 407 and Per Se Violations....................................................................46Count XIV....................................................................................................................................48Bryan Scott – Chapter 408..........................................................................................................48Count XV......................................................................................................................................48Bryan Scott – Common Law Fraud...........................................................................................48Count XVI....................................................................................................................................51Civil Conspiracy...........................................................................................................................51

Count IMr. and Mrs. Citizen - Chapter 407 Violations and Per Se Violations

(Against All Named Defendants)

79. Mr. and Mrs. Citizen, a married couple, live in the City of St. Louis at [street address].80. Mr. Citizen’s relationship with Ameriquest began before he was married to Mrs. Mr.

Citizen closed his first loan with Ameriquest on or about February 24, 1999. He was single at that time. The loan was for $63,700 for which he paid $4,473.72 in fees.

81. The interest rate on the first loan was 10.99% per year. This rate became variable on March 1, 2002 with a floor of 10.99% and a ceiling of 16.99%.

Page 15

82. Mr. and Mrs. Citizen closed the second loan with Ameriquest on or about May 14, 2002. The second loan was for $97,500 for which they paid fees of $6,858.23. These fees included, but we not limited to:

$3,900.00 “loan discount fee” payable to Ameriquest; $300.00 “appraisal fee” payable to Mr. Quirk; $626.00 “lenders processing fee” payable to Ameriquest; and $360.00 “application fee” payable to Ameriquest.

83. The interest rate on the second loan was 9.25% per year. This rate became variable on June 1, 2004 with a floor of 9.25% and a ceiling of 15.25%.

84. After the May 14, 2002, loan was closed, Ameriquest once again contacted Mr. and Mrs. Citizen about saving additional money by refinancing their home loan.

85. Mr. and Mrs. Citizen closed their third loan with Ameriquest on or about September 8, 2004. The third loan was for $135,000 for which they paid fees of $8774.02. These fees included, but we not limited to: $4,365.90 “loan discount fee” payable to Ameriquest; $51.00 for “tax related service” and “flood search fee” payable to Ameriquest; $626.00 “lenders processing fee” payable to Ameriquest; $239.00 payable to Ameriquest marked only as “admin”; $360.00 “application fee” payable to Ameriquest; $200.00 “closing fee” payable to Vital Signing; $50.00 for “document preparation”; $475.00 in “wire fees”; $400.00 “staff appraiser fee”; and a $30.00 courier fee.

86. The interest rate on the third loan was 8.4% per year. This rate became variable in two years with a ceiling of 14.4%.

87. Prior to the closing of the third loan, Mr. Citizen specifically asked Ameriquest whether he would have to pay a pre-payment penalty. Ameriquest assured him that he would not. Despite Ameriquest’s assurances, Ameriquest charged the Citizens a pre-payment penaltyof $4,439.50.

88. The pre-payment penalty would have expired on May 24, 2005.89. This pre-payment penalty was in excess of two percent of the balance of the loan in

violation of § 408.036 RSMo 2000.90. Ameriquest flipped Mr. and Mrs. Citizen’s first loan in only two years and four months.

The “flipping” of this loan contradicts the 2002 FTC testimony of Mr. Bass, then the Senior Executive Vice President of Ameriquest. It further violates Ameriquest’s agreement with the FTC and it violates Ameriquest’s promise to conform its conduct to its highly publicized “Best Practices.”

91. The settlement of the third loan occurred at Mr. and Mrs. Citizen’s home in the City of St.Louis.

92. At the closing, Mrs. Citizen called Ameriquest to complain about discrepancies in the final loan documents, including an unusually high pay-off amount to Ameriquest.

Page 16

Ameriquest assured the Citizens that these discrepancies would be adjusted and taken care of after closing.

93. Mrs. Citizen faxed, called and wrote Ameriquest multiple times between September 12, 2004, and September 23, 2004, after closing the loan to complain about mistakes in the loan documents, including an unusually high pay-off amount to Ameriquest.

94. Ameriquest faxed a reply to the Citizens on September 23, 2004, after it was too late to rescind the loan, Only then did Ameriquest admit that a prepayment penalty had been added to the payoff amount regarding the first loan. Ameriquest did not fix or correct anyof the discrepancies it had earlier stated would be adjusted.

95. Each of these actions and omissions constituted a violation of §407.020.96. As a direct and proximate result of these actions and omissions, Plaintiffs suffered

ascertainable losses of money and other actual damages.97. Mr. and Mrs. Citizen therefore ask this Court to grant them judgment against Defendants,

jointly and severally, and to grant them the relief set forth in the Prayer of this Petition.98. These Plaintiffs incorporate these allegations by reference into each of the other Counts

of this Petition.Count II

Mr. and Mrs. Citizen – Chapter 408(Against All Named Defendants)

99. The pre-payment penalty charged to Mr. and Mrs. Citizen exceeded two percent of the balance of their loan, in violation of § 408.036 RSMo 2000.

100.As a direct and proximate result of this violation, Plaintiffs suffered ascertainable losses of money and other actual damages.

101.Mr. and Mrs. Citizen therefore ask this Court to grant them judgment against Defendants,jointly and severally, and to grant them the relief set forth in the Prayer of this Petition.

Count IIIMr. and Mrs. Citizen – Common Law Fraud


102.All previous allegations are incorporated by reference as if fully set forth herein. 103.In addition to violating Missouri Revised Statute § 407.010, Defendants’ acts and

omissions constitute common law fraud. Defendants coordinated their acts and omissions to give borrowers a misleading and patently false perception of the loans they offered, sold and closed. Defendants accomplished this unlawful goal through a combination of overt misrepresentations, fraudulent omissions and concealments.

104.The Defendant’s affirmative misrepresentations included but were not limited to the following:

a. That Defendants were offering the borrowers a better deal than their existing loans, when in fact they were charging fees so high that the Plaintiffs would be substantially deprived of their hard-earned equity;

b. That Defendants would not be charging any prepayment penalty when in fact theywould be charging such a penalty;

c. That Defendants’ appraisal of Plaintiffs’ home was reasonably accurate such that the Plaintiffs should proceed with refinancing when the appraisal was not accurate.

Page 17

d. That Defendants would rectify errors in loan documents but never intended to do so and didn’t do so.

105.In addition to the affirmative misrepresentations, defendants had a duty to disclose information not within the fair and reasonable reach of the other party. Silence can be an act of fraud where matters are not what they appear to be and the true state of affairs is not discoverable by ordinary intelligence. The Defendants’ acts of fraud by omissionand concealment include, but are not limited to, the following:

a. Defendants failed to disclose that they would be charging prepayment penalties when soliciting these borrowers or at time of closing;

b. Defendants appeared at the closing but were unwilling or unable to answer reasonable questions the borrower had about the terms of the loan;

c. Defendants failed to disclose at the time of soliciting the Plaintiffs or at the time of the loan closing that waiting a few months would allow the Plaintiffs to avoid paying any prepayment penalty;

d. Defendants failed to disclose that new loans would contain adjustable rate mortgages higher than the rates included in the Plaintiffs’ then-current loan;

e. Defendants failed to disclose that an individual loan for the amount which the borrower sought to obtain would have been far less expensive than a complete refinance of the Plaintiffs’ mortgage.

106.Further, Defendants actions and omissions constituted fraud in that they:a. Repeatedly presented the Citizens with loan paperwork and oral statements that

falsely indicated that no prepayment penalty would be charged to them when the truth is that they were going to be charged prepayment penalties.

b. Concealed from the Citizens that they would not incur any prepayment penalty if they waited nine months prior to refinancing.

c. On the date of closing, Ameriquest falsely told the Citizens that discrepancies and the high payoff amount shown in the loan paperwork were incorrect and that they would be remedied subsequent to the loan closing.

107.Each of these representations and omissions were material and false. 108.The Defendants knew of their falsity and of the Plaintiffs’ ignorance of the truth;109.The Defendants intended for the Plaintiffs to rely upon Defendants’ misrepresentations

and omissions.110.The Plaintiffs were ignorant of the falsity of the Defendants’ misrepresentations and

omissions, they had the right to rely on them and they relied upon on their truth. 111. As a direct and proximate result of these actions and omissions, Plaintiffs suffered

ascertainable losses of money and other actual damages.112.These Plaintiffs therefore ask this Court to grant them judgment against Defendants,

jointly and severally, and to grant them the relief set forth in the Prayer of this Petition.113.Plaintiffs incorporate these allegations by reference into each of the other Counts of this

Petition.Count IV

Mr. and Mrs. Voyles – Chapter 407 Violations and Per Se Violations(Against All Named Defendants)

114.Mr. and Mrs. Voyles, a married couple, live within the City of St. Louis at [street address].

Page 18

115.Mr. and Mrs. Voyles closed their first loan with Argent on or about January 22, 2004. The loan was for $72,000.00 for which they paid $8032.41 in fees.

116.The interest rate on the first loan was 8% per year. This rate became variable on February 1, 2006 with a floor of 8% and a ceiling of 10%.

117.Mr. and Mrs. Voyles closed their second loan with Argent on or about June 22, 2004. Theloan was for $88,200 for which they paid $6,153.31 in fees. These fees included, but we not limited to:

$882.00 “loan origination fee” payable to Premier Equity; $300 “appraisal fee” payable to Andres Appraisal; $375.00 “underwriting fee” payable to Argent; $2,327.00 “broker fee” payable to Premier Equity; $50.00 “settlement fee” payable to NETCO, Inc.; $328.00 “title insurance” payable to NETCO, Inc.; $100.00 “EPA, COMP, LOC, ARM” payable to NETCO, Inc.; $40.00 in additional charges to NETCO for “courier/wire fees.”

118.Argent flipped the first loan of Mr. and Mrs. Voyles a mere five months after that loan closed. The “flipping” of this loan contradicts the 2002 FTC testimony of Mr. Bass, then the Senior Executive Vice President of Ameriquest. It further violates Ameriquest’s agreement with the FTC and it violates Ameriquest’s promise to conform its conduct to its highly publicized “Best Practices.”

119.The Voyles were charged a pre-payment penalty for paying off their loan within two years of “two percent (2%) on the amount by which the total prepayment(s) within any 12-month period exceeds twenty percent (20%) of the original principal amount on the loan.” Upon information and belief, the sum of this prepayment penalty was $2,213.25.

120.This pre-payment penalty was in excess of two percent of the balance of the loan in violation of § 408.036 RSMo 2000.

121.The interest rate on the second loan was 7.5% per year. This rate became variable on July1, 2006 with a floor of 7.5% and a ceiling of 13.5%.

122.The only representative of Argent and its co-conspirators at the closing of the second loanwas Ms. Hester, a Missouri notary and employee of NETCO, Inc.

123.The second loan was closed at the offices of NETCO, Inc. located at [street address].124.Prior to closing on the second loan, the Voyles were assured that there would be no more

than $3,000 in closing costs and that they would receive $10,000 cash back upon refinancing.

125.The Voyles only received $7,479 cash back from the loan and paid over $6,000 in closingcosts.

126.Defendants repeatedly presented the Voyles with loan paperwork that indicated that no prepayment penalty would be charged to them.

127.At the closing of the loan, the only representative of Defendants was a notary from NETCO, inc., who was either unable to answer any of the Voyles’ questions or refused to answer their questions.

128.As a direct and proximate result of these actions and omissions, Plaintiffs suffered ascertainable losses of money and other actual damages.

Page 19

129.These Plaintiffs therefore ask this Court to grant them judgment against Defendants, jointly and severally, and to grant them the relief set forth in the Prayer of this Petition.

130.Plaintiffs incorporate these allegations by reference into each of the other Counts of this Petition.

Count VMr. and Mrs. Voyles – Chapter 408


131.The pre-payment penalty charged to Mr. and Mrs. Voyles exceeded two percent of the balance of their loan, in violation of § 408.036 RSMo 2000.




Count VIMr. and Mrs. Voyles – Common Law Fraud

(Against All Defendants)




a. Defendants promised the Voyles a better deal than their existing loans, when in fact they were charging fees so high that the Voyles would be substantially deprived of their hard-earned equity;

b. That Defendants would not be charging the Voyles any prepayment penalty when in fact they would be charging such a penalty;

c. That Defendants’ appraisal of the Voyles home was reasonably accurate such that the Plaintiffs should proceed with refinancing when the appraisal was not accurate.

d. That Defendants would rectify errors on the Voyles’ loan documents but never intended to do so and didn’t do so.



Page 20





139.Further, Defendants actions and omissions constituted fraud in that they:a. Repeatedly presented the Voyles with loan paperwork that falsely indicated that

no prepayment penalty would be charged to them. b. Promised the Voyles closing costs of less than $3,000 when in reality the costs

exceeded $6,000c. Falsely promised the Voyles a cash payout of $10,000 when in reality the payout

was less than $7,500d. Failed to disclose that the prepayment penalty violated Missouri Revised Statute §

408.036e. Failed to disclose that the interest on the July loan could actually be higher than

the interest rate of the then-current loan of the Voyles. 140.Each of these representations and omissions were material and false. 141.The Defendants knew of their falsity and of the Plaintiffs’ ignorance of the truth;142.The Defendants intended for the Plaintiffs to rely upon Defendants’ misrepresentations


omissions, they had the right to rely on them and they relied upon on their truth. 144.As a direct and proximate result of these actions and omissions, Plaintiffs suffered



Petition.

Count VIIMr. and Mrs. Pesek – Chapter 407 Violations and Per Se Violations


147.Mr. and Mrs. Pesek, a married couple, live within the City of St. Louis at [street address].

148.Mr. and Mrs. Pesek closed their first loan with Ameriquest on or about January 24, 2004. The loan was for $78,000 for which they paid $5,589.65 in fees.

149.The interest rate on the first loan was 8.25% per year. This rate became variable on February 1, 2006 with a floor of 8.25% and a ceiling of 10.25%.

Page 21

150.After the first loan was closed, Ameriquest contacted the Peseks about refinancing and promised to save them money.

151.Mr. and Mrs. Pesek closed their second loan with Ameriquest on or about December 15, 2004. They paid an estimated $5,983.48 in fees.

152.Ameriquest flipped Mr. and Mrs. Pesek’s first loan after approximately eleven months. The “flipping” of this loan contradicts the 2002 FTC testimony of Mr. Bass, then the Senior Executive Vice President of Ameriquest. It further violates Ameriquest’s agreement with the FTC and it violates Ameriquest’s promise to conform its conduct to its highly publicized “Best Practices.”

153.Prior to the closing of the second loan, Mrs. Pesek asked Ameriquest whether the Peseks would have to pay a pre-payment penalty. Ameriquest assured Mrs. Pesek that they would not. Despite Ameriquest’s assurances, Ameriquest charged the Peseks a pre-payment penalty of approximately $4,000.

154.Ameriquest told Mrs. Pesek that the Peseks would receive $9,000 upon refinancing their home.

155.At closing, the Peseks only received $3,000.156.As a direct and proximate result of these actions and omissions, Plaintiffs suffered



Petition.Count VIII

Mr. and Mrs. Pesek – Common Law Fraud(Against All Named Defendants)








162.In addition to the affirmative misrepresentations, defendants had a duty to disclose information not within the fair and reasonable reach of the other party. Silence can be

Page 22

an act of fraud where matters are not what they appear to be and the true state of affairs is not discoverable by ordinary intelligence. The Defendants’ acts of fraud by omissionand concealment include, but are not limited to, the following:






163.Further, Defendants actions and omissions constituted fraud in that they:a. Promised the Peseks a cash payout of $9,000 when in reality the payout was only

about $3,000b. Promised the Peseks that there would be no prepayment penalty but charged the

Peseks a prepayment penalty of approximately $4,000164.Each of these representations and omissions were material and false. 165.The Defendants knew of their falsity and of the Plaintiffs’ ignorance of the truth;166.The Defendants intended for the Plaintiffs to rely upon Defendants’ misrepresentations





Petition.Count IX

Mr. & Mrs. Robinson – Chapter 407 Violations and Per Se Violations(Against All Named Defendants)

171.Mr. and Mrs. Robinson, a married couple, live in the City of St. Louis at [street address].172.Mr. and Mrs. Robinson closed their first loan with Ameriquest on or about November 1,

2001. The loan was for $112,500 for which they paid $8,313.46 in fees. 173.The interest rate on the first loan was 8.599% per year. This rate became variable on

December 1, 2003 with a floor of 8.599% and a ceiling of 14.599%.174.After the November 1, 2001 loan was closed, Ameriquest once again contacted Mr. and

Mrs. Robinson about saving additional money by refinancing their home loan.175.Mr. and Mrs. Robinson closed their second loan with Ameriquest on or about June 16,

2003. The loan was for $140,000 for which they paid $9,367.35 in fees. These fees included, but we not limited to:

Page 23

$5,548.20 “loan discount fee” payable to Ameriquest; $200.00 “appraisal fee” payable to Bliss Associates, Inc.; $626.00 “lenders processing fee” payable to Ameriquest.

176.Ameriquest flipped Mr. and Mrs. Robinson’s first loan after only seventeen months. The “flipping” of this loan contradicts the 2002 FTC testimony of Mr. Bass, then the Senior Executive Vice President of Ameriquest. It further violates Ameriquest’s agreement with the FTC and it violates Ameriquest’s promise to conform its conduct to its highly publicized “Best Practices.”

177.Prior to the closing of the second loan, Ameriquest told Mr. Robinson that the pre-payment penalty would not be charged to him and that it would be waived. Despite Ameriquest’s assurances, Mr. and Mrs. Robinson incurred a prepayment penalty of $3,341.31 when they refinanced their loan.

178.Ameriquest promised Mr. and Mrs. Robinson that they would receive an interest rate of 6.5% on their second loan. Instead, the rate was 7.5%.

179.During the loan application process, Mr. Heembrock, a Missouri appraiser, appraised the Robinson’s home at [street address]. Mr. Heembrock’s appraisal valued the Robinson home at $125,000 using the market approach.

180.Ameriquest commissioned Bliss Associates, Inc. to appraise the Robinson’s home at a higher value to support the $140,000 loan. Bliss Associates, Inc., a Missouri company, appraised the Robinson’s home at $158,000.

181.Upon information and belief, the only representative of Defendants at the closing of the second loan was Ms. Thomas, a Missouri notary.

182.Ameriquest continues to contact the Robinsons about refinancing their home again despite the Robinson’s refusal to do business with Ameriquest.




Count XMr. & Mrs. Robinson – Common Law Fraud






Page 24










190.Further, Defendants actions and omissions constituted fraud in that they:a. Promised to waive the prepayment penalty but then charged a prepayment penalty

of $3,341. b. Promised an interest rate of 6.5% but refinanced the Robinson’s home loan at a

rate of 7.5%c. Provided a false appraisal value regarding the Robinsons’ home.d. Included a “loan discount fee” of $5,548 but never explained to the Robinson’s

that this fee did not reduce the cost of the loan but, in fact, increased it. 191.Each of these representations and omissions were material and false. 192.The Defendants knew of their falsity and of the Plaintiffs’ ignorance of the truth;193.The Defendants intended for the Plaintiffs to rely upon Defendants’ misrepresentations





Petition.Count XI

Mr. & Mrs. Axley – Chapter 407 Violations and Per Se Violations

Page 25


198.Mr. and Mrs. Axley are a married couple living within the City of St. Louis at [street address].

199.Mr. and Mrs. Axley closed their first loan with Argent on or about January 9, 2004. The loan was for $100,800 for which they paid $5,087.02 in fees. Netco was the settlement agent on this first loan.

200.The interest rate on the first loan was 7.99% per year. On February 1, 2006 the loan became variable and it could deviate between 7.65% and 13.650%.

201.Mr. and Mrs. Axley closed their second loan with Ameriquest on or about February 3, 2005. The loan was for $111,500 at a 6.99% fixed interest rate, for which they paid $8,674.84 in fees. These fees included, but we not limited to:

$4,315.05 “loan discount fee” to Ameriquest; $626.00 “lenders processing fee” to Ameriquest; $239.00 “admin fee” to Ameriquest; $360 “application fee” to Ameriquest; $400 “staff appraiser fee.”

202.Ameriquest flipped Mr. and Mrs. Axley’s first loan in less than thirteen months. The “flipping” of this loan contradicts the 2002 FTC testimony of Mr. Bass, then the Senior Executive Vice President of Ameriquest. It further violates Ameriquest’s agreement with the FTC and it violates Ameriquest’s promise to conform its conduct to its highly publicized “Best Practices.”

203.When refinancing their loan, Mr. and Mrs. Axley incurred a pre-payment penalty for paying off their loan with Argent in less than two years. This pre-payment penalty was approximately $1650.14.

204.Ameriquest told the Axleys that Ameriquest would inflate the value of their home in order to facilitate the loan.

205.Prior to closing, the Axleys contemplated not going through with the loan. Ameriquest threatened the Axleys with fees if they did not sign the papers. Mrs. Axley felt that they did not have any choice but to follow through with the loan.




Count XIIMr. & Mrs. Axley – Common Law Fraud



omissions constitute common law fraud. Defendants coordinated their acts and omissions to give borrowers a misleading and patently false perception of the loans

Page 26

they offered, sold and closed. Defendants accomplished this unlawful goal through a combination of overt misrepresentations, fraudulent omissions and concealments.


a. That Defendants were offering the Axleys a better deal than their existing loans, when in fact they were charging fees so high that the Plaintiffs would be deprived of their hard-earned equity;

b. That Defendants would not be charging the Axleys any prepayment penalty when in fact they would be charging such a penalty;

c. That Defendants’ appraisal of the Axleys home was reasonably accurate such that the Plaintiffs should proceed with refinancing;

d. That Defendants promised to rectify errors in loan documents but never intended to do so.







213.Further, Defendants actions and omissions constituted fraud in that they:a. Falsely told the Axleys that they couldn’t back out of the refinance of their

mortgage without incurring substantial fees.b. Charged the Axleys a “loan discount fee” of $4,315.05 , but never explained to the

Axleys that this fee did not reduce the cost of the loan but, in fact, increased it. 214.Each of these representations and omissions were material and false. 215.The Defendants knew of their falsity and of the Plaintiffs’ ignorance of the truth;216.The Defendants intended for the Plaintiffs to rely upon Defendants’ misrepresentations




jointly and severally, and to grant them the relief set forth in the Prayer of this Petition.

Page 27


Count XIIIMr. Scott – Chapter 407 and Per Se Violations


221.Mr. Scott lives in the City of St. Louis at [street address]. 222.Mr. Scott closed a first loan with Ameriquest.223.After closing the first loan with Ameriquest, Mr. Scott was contacted by a broker working

with Argent about refinancing his loan.224.Mr. Scott closed his second loan with Argent on or about August 3, 2004. The loan

was for $180,400.00, for which he paid $6,110.35 in fees. These fees included, but we not limited to:

$1,804.00 “origination fee” to Best Rate Funding Corp; $375.00 “underwriting fee” to Argent; $200.00 “notary fees” to United Title; and a $550.00 “escrow fee” to United Title

225.The interest rate on the second loan was fixed at 7.9% for two years, after which the rate became variable and was capped at 13.9%.

226.Prior to closing on the second loan, Mr. Scott was assured that he would not have a prepayment penalty since Argent is a subsidiary of Ameriquest. Despite these assurances, Mr. Scott incurred a pre-payment penalty of $6,944.75.

227.The “flipping” of this loan contradicts the 2002 FTC testimony of Mr. Bass, then the Senior Executive Vice President of Ameriquest. It further violates Ameriquest’s agreement with the FTC and it violates Ameriquest’s promise to conform its conduct to its highly publicized “Best Practices.”

228.Defendants arranged Mr. Scott’s closing to occur at a Denny’s Restaurant, without the presence of any person knowledgeable regarding the terms and conditions of the loan.

229.The paperwork presented to Mr. Scott at this closing showed a false payoff amount. It was three weeks later, after it was too late for him to cancel this loan, that Mr. Scott received paperwork showing this altered paperwork indicating a pre-payment penalty of $6,944.75.

230.This pre-payment penalty was in excess of two percent of the balance of the loan in violation of § 408.036 RSMo 2000.

231.Mr. Scott was assured that his car loan would be paid off when he refinanced his home with Argent. Argent failed to pay off Mr. Scott’s car loan and failed to tell him of these material changes in their loan agreement.

232.Mr. Scott only learned of Argent’s failure to pay off his car loan when he found out that he was two or three months late on his car payments.




Page 28

Count XIVMr. Scott – Chapter 408


236.The pre-payment penalty charged to Mr. Scott exceeded two percent of the balance of his loan, in violation of § 408.036 RSMo 2000.

237.As a direct and proximate result of these actions and omissions, Mr. Scott suffered ascertainable losses of money and other actual damages.

238.Mr. Scott, therefore asks this Court to grant him judgment against Defendants, jointly andseverally, and to grant them the relief set forth in the Prayer of this Petition.


Count XVMr. Scott – Common Law Fraud





a. That Defendants were offering the borrowers a better deal than their existing loans, when in fact they were charging fees so high that the Plaintiffs would be deprived of their hard-earned equity;


c. That Defendants’ appraisal of Plaintiffs’ home was reasonably accurate such that the Plaintiffs should proceed with refinancing;

d. That Defendants promised to rectify errors in loan documents but never intended to do so.





Page 29



244.Further, Defendants actions and omissions constituted fraud in that they:a. Falsely told Mr. Scott that he would not incur a prepayment penalty in his

mortgage refinance because his first loan was with Ameriquest and his second loan was with Argent.

b. Presented Mr. Scott with loan paperwork showing a false payoff amount.c. Told Mr. Scott that he had incurred a prepayment penalty only after it was too late

for him to cancel his refinancing.d. Falsely told Mr. Scott that Defendants would pay off his car loan.

245.Each of these representations and omissions were material and false. 246.The Defendants knew of their falsity and of the Plaintiff’s ignorance of the truth;247.The Defendants intended for the Plaintiff to rely upon Defendants’ misrepresentations

and omissions.248.The Plaintiff was ignorant of the falsity of the Defendants’ misrepresentations and


ascertainable losses of money and other actual damages.250.This Plaintiff therefore asks this Court to grant him judgment against Defendants, jointly

and severally, and to grant them the relief set forth in the Prayer of this Petition.251.Plaintiffs incorporate these allegations by reference into each of the other Counts of this

Petition.Count XVI

Civil Conspiracy(Against All Named Defendants)

252.Defendants engaged in the deceptive practices and fraudulent activities described in this Petition for the purpose of illegally inducing borrowers into expensive, entangling, and dangerous loans which increased the likelihood of foreclosure, trapped borrowers in unfair and deceptive terms, reduced equity, and prevented borrowers from refinancing their loans with other lenders.

253.Defendants conspired to work together. Each Defendant had knowledge of the other Defendants and all worked in concert to commit deceptive and unfair practices as well to commit fraud.

254.Each Defendant profited financially as a result of the civil conspiracy. 255.Each Defendant facilitated and was a critical part of the deceptive plan. The initial high

pressure sales contact, the deceptive sales pitch, the confusing disclosures, the false promises, the inflated appraisals, the notary who acted as a closing agent, and the various other illegal acts all contributed to the Defendants’ successful commission of deceptive and unfair practices as well the commission of fraud.

256.Defendants engaged in a number of illegal acts in the process of carrying out the civil conspiracy. These acts include but are not limited to:

a. misrepresenting the terms of the loan to the borrower;

Page 30

b. failing to disclose material information regarding prepayment penalties;c. promising borrowers that the new loan would benefit them when in fact it cost

them equity in their home, included large fees, included a prepayment penalty andincreased the likelihood of foreclosure;

d. Providing false appraisals in order to inflate home values;e. Flipping loans despite repeated promised not to engage in such activities;f. Serving as a loan closing agent despite being unqualified to do so and unwilling

or unable to provide information to borrowers;g. Concealing material facts by encouraging borrowers to sign closing documents

quickly rather than taking the time to read and inspect them. 257.As a direct and proximate result of Defendants’ civil conspiracy plaintiffs were injured.

Plaintiffs request damages as set on in the Prayer in this Petition. Prayer

The Plaintiffs each ask this Court to find that the acts and omissions of the Defendants each constitute violations of §407.020 and §407.025, and that they constitute per se violations of §407.020 and §407.025. Further, those Plaintiffs who have alleged Chapter 408 Counts ask this Court to find that Defendants have violated the provisions of Chapter 408 RSMo. Plaintiffs seekrelief only pursuant to Missouri state law.

Plaintiffs seek a trial by jury with regard all facts and issues raised by each of the above Counts.

Plaintiffs further pray that this Court enter judgment against Defendants for each of the above-described violations of §407.020. Plaintiffs further pray for this Court to award the following relief:

a) Awarding each of the Plaintiffs actual damages for each separate violation of §407.020 against the Defendants, jointly and severally, in amounts that are fair and reasonable and in excess of $25,000 for each Plaintiff

b) Awarding Plaintiffs the amount of any prejudgment interest from the date of the closing of the “flipped” loan (or from the earliest alternate time deemed reasonable and appropriate by the Court), the costs of this action and the Plaintiffs’ reasonable attorney’s fees.

c) An award of the amounts of all fees associated with each of the flipped loans described above.

d) Find that Defendants’ actions justify awarding punitive damages and further awarding Plaintiffs punitive damages against each of the Defendants, jointly and severally, in amounts that are fair and reasonable and in excess of $25,000.

e) With regard to each of the above Counts alleging common law fraud, Plaintiffs each seek all actual and punitive damages allowed by law.

f) With regard to those Plaintiffs who have stated Counts based upon Chapter 408, awarding those Plaintiffs each of the remedies provided by Chapter 408, includingtwice the amount paid in prepayment penalties, together with costs of the suit and reasonable attorney’s fees;

g) Orders of this Court providing the following:i. Declaring and decreeing that the note associated with the flipped loan be

null and void and rescinding the loan transactions of each Plaintiff, this

Page 31

being a judgment binding on Defendants and capable of recordation in public records.

ii. Permanently enjoining Defendants from engaging in any similar misrepresentations or omissions regarding home mortgages.

iii. Returning to Plaintiff any money or property given by Plaintiff to any person or entity, including Defendants, in connection with the loan transactions described in this Petition.

iv. Enjoining Defendants from instituting, prosecuting or maintaining foreclosure proceedings on the homes of the Plaintiffs or taking any other steps to deprive the Plaintiffs of their ownership of their homes.

h) Awarding the Plaintiffs such other and further relief as the Court deems just and proper pursuant to Missouri state law.

Mr. ∙ Passanante, P.C.

____________________________________Attorneys for Plaintiffs

Page 32

Documents

7 Property Flipping Complaint