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Wachovia is suing Ameriquest Mortgage for $1 million dollars accusing them of selling bad loans, representing further fallout from a meltdown in the subprime mortgage lending industry.

Wednesday, Ameriquest based in Orange, California, filed to move the case into federal court. Wachovia filed the lawsuit last month in Charlotte Superior Court.

Wachovia claims they paid Ameriquest almost $129 million for loans in December 2005. But several borrowers were unable to make the loan payments and they became “non-performing.” The bank says they have identified at least 135 loans Ameriquest misrepresented.

Wachovia further alleges they found incorrect credit scores, false employment records and misstatements of the kind of homes that were being financed.

Wachovia wants Ameriquest to buy back the loans. Ameriquest has refused and ceased communicating with Wachovia.

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