Vericrest Financial: homicidally otiose

By Felix Salmon
April 29, 2011

We’ve heard a fair amount about the human toll of the subprime crisis — although, frankly, not enough. So this story deserves wide play: Manuel Lopez and Christina Garcia, and their 12-year-old son Christian Garcia, died in a grisly fire Monday morning, because the building they lived in was full of illegally built walls which blocked access to the fire escape. Who was responsible for looking after the building and making sure it was up to code? The message I get from the NYT‘s Jim Dwyer is that it’s a Dallas company called Vericrest Financial.

The insouciance of Vericrest, here, is downright breathtaking:

Did Vericrest take care of the building while it was in foreclosure, or even know that it was supposed to?

“Vericrest is not going to comment,” a spokesman said.

The backstory, as pieced together by Dwyer, is that the three-family building at 2321 Prospect Avenue went into strategic default long ago, after the owner, Domingo Cedano, who bought the building with no money down, stopped making his mortgage payments.

Under New York state law, when that happens, and once foreclosure proceedings begin, the lender becomes responsible for the property. In this case, the loan is owned by a trust, Bank of New York Mellon is the trustee, and the bank in turn has hired Vericrest to handle the loans in the trust.

Here’s what Vericrest says about itself:

Vericrest Financial, Inc. is a privately held, premier financial services company primarily engaged in the servicing of residential mortgage and consumer finance loans. Vericrest Financial, Inc. is led by a seasoned team of financial services industry professionals who have over 20 years of experience in working with customers and investors. Our business operations are located in Oklahoma, New Jersey, California and Texas.

Vericrest Financial, Inc. is dedicated to providing superior customer care and maintaining the highest level of quality, integrity and trust that our customers, employees, investors and other business associates expect and deserve. Vericrest Financial, Inc. is regulated by numerous state and federal regulatory agencies and holds the requisite licenses to service mortgage and consumer finance loans and to conduct other aspects of its business in those states where it does business.

It’s fair to assume that Vericrest, as the holder of all the requisite licenses to do what it does in New York state, is indeed cognizant of any legal obligation it had to maintain 2321 Prospect Avenue, since it was “abandoned by the mortgagor but occupied by a tenant.” Assuming that somewhere along the line foreclosure proceedings were initiated, the law is clear:

For the purposes of this section “maintain” shall mean keeping the subject property in a manner that is consistent with the standards set forth in the New York property maintenance code… provided, however, that if the property is occupied by a tenant, then such property must also be maintained in a safe and habitable condition.

What we’re seeing here is a particularly tragic instance of something that has been happening a lot over the course of the subprime crisis — the way in which mortgages, once they become transmogrified into purely financial instruments, lose all connection to real-world buildings and humans. When my credit union makes a mortgage loan, we know the borrower and we know the building and we have relationships there. When Vericrest Financial takes on responsibility for loans in an investment trust, there’s no relationship at all, and there’s precious little incentive for the company to send someone out to the Bronx to find out what it’s responsible for.

If the law was indeed broken by Vericrest in this case, I hope that it and its principals face criminal prosecution. Only that will make these “premier financial services companies” wake up and realize what their real-world responsibilities can mean.

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