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January 12, 2007

Private Equity Guru: Would You Buy Ameriquest?

posted by MR WAVETHEORY at 1/12/2007 01:52:00 AM
Rumor mongers are saying that a hedge fund could soon own sub-prime mortgage lender Ameriquest.

Privately held Ameriquest engaged JP Morgan Securities to attempt to find a possible buyer. The New York Post identified Ellington Capital as interested in the company.

Greenwich, Conn.-based Ellington has about $4.5 billion in assets under management, with the majority of that dedicated to mortgage bonds. Since the fund has expertise on high-risk debt, it is already familiar with Ameriquest's business.

Buying a subprime lender past the peak of the cycle counts in my book as either the best way to succeed unconventionally or to fail spectacularly. Plus, Ameriquest doesn't exactly draw rave reviews from its customers - err, victims.

Ameriquest recently paid $295 million to settle charges by regulators it had engaged in predatory lending. The entire sub-prime industry has had to cut mortgage fees and rates, and concerns persist that overburdened consumers could soon start to default at increased rates.

I'd bet there is alot more skeletons in the closet than meets the eye. Anyone say Refco?

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