When Ameriquest put in place an automated system to speed mortgage processing, it cut more than half of the 50 steps used to administer loans.
However, it also eliminated some of the checks that verified that the information on an application, such as a borrower's salary, was accurate.
Former Ameriquest loan officers charge that fellow mortgage processors took advantage of the situation to push through loans for borrowers who weren't qualified to receive themoften at inflated fees.
Mark Bomchill, for example, worked as a loan processor at Ameriquest in 2003.
He says he was driven to quit not only by questionable loans, but by the unabashed joy his colleagues took in getting the highest possible rates from unsuspecting borrowers.
"These guys were cheering and high-fiving each other before the clients even got to their cars in the parking lot," he says.
Dissection: Ameriquest's Problems and Solutions
Ameriquest Home Loans: Cracking Under Pressure: Even in a fertile market, it's possible to set your sales goals too high.
Loan Rangers: Ameriquest became unusually successful digging up loan candidates others may have overlooked.
Settling Up: Ameriquest's hard-sell tactics worked but, say investigators, violated a series of consumer-protection laws.
Riding the Sub-prime Wave: As the house market heated up, borrowers stretched themselves to foreclosure-threatening lengths; and lenders helped them.
No-Touch Funding: Believing in your applicants can go too far, and get you both in trouble.
Who's to Say: Automation was supposed to make loan approvals faster, easier and more accurate; did the system fail, or did the officers handling the loans?
Tighter Controls: Making requirements stiffer only works if enforcement gets tighter as well.
Penalties for Abuse: Ameriquest denies wrongdoing, relies on IT for process improvements, and may face penalties in the hundreds of millions of dollars from class-action suits.
Avoiding the New Restrictions: It's one thing to let borrowers overextend themselves; it's something else to deceive them into doing it.
Ameriquest's Business, by the Numbers
The Rest of the Story:
Gotcha! Fraud Protection Systems: There are some pretty effective fraud preventers, but there are serious challenges to making them work.
Fraud ProtectionOr Not: CRM systems can do a lot to prevent fraud, but they're nothing compared with an audit by someone who cares.
Player Roster: Who's who at Ameriquest, and which ones were instrumental in an automation system that hollowed out the checks and balances on which the company depended.
Base Technologies: Ameriquest relied on a series of custom packages to get its overhaul done. Here's a rundown of the critical pieces.
Roadblock: Unscrupulous Employees The best intelligence on fraud prevention in the world won't help if the CEO doesn't listen.
Help with Compliance: Visa Systems; access-control software gives a much-needed hand to companies trying to comply with Sarbanes-Oxley regulations.