By Paul Muolo

WASHINGTON–The origination practices of loan brokers may soon fall under the microscope of the states if one state attorney general gets his way.

Iowa AG Tom Miller, who headed the Ameriquest Mortgage investigation, is vowing that the states might next tackle the thorny issue of “upselling” by brokers.

Speaking during the recent Ameriquest settlement press conference, AG Miller promised that broker practices “are something we will look at in the future.”

The Ameriquest investigation by the states focused on retail loan practices and did not touch on table funding.

A spokesman for Mr. Miller said the AG, at this time, has little more to say about the issue of brokers and their lending practices. “He said brokers are on our radar screen but he has nothing more specific to say at this time.”

In mid-January, subprime giant Ameriquest Mortgage, Orange, Calif., agreed to pay $325 million to settle claims with 49 states that the company engaged in abusive lending practices.

Ameriquest’s wholesale affiliate, Argent Mortgage (which funds through loan brokers), was not a party to the settlement.

Mr. Miller headed the AG’s effort in regard to Ameriquest. A few years ago he was in charge of a multistate settlement with subprime giant Household Finance of Prospect Heights, Ill.

Household, which is now owned by London bank HSBC Holdings, shelled out a record $484 million to settle predatory lending allegations.

During the Ameriquest press conference, the participating AGs singled out the practice of “upselling” to consumers — whereby a retail loan officer receives extra compensation for originating mortgages that carry either a higher note rate or extra points above the going rate.

AGs noted the practice of upselling is not necessarily illegal but one AG said “invariably, it leads to illegal activity” because at some point during the loan process false information may be given to a consumer.

AGs cautioned that any lender which has a culture of “sell, sell, sell” could be headed for trouble because in such a business atmosphere volume comes first and oversight controls are ignored.