Vericrest Financial has not accepted federal TARP money nor signed onto the Obama Making Home Affordable Plan. Therefore, Veriquest is not required to cooperate with the Obama Plan and has chosen not to do so.
The primary leverage available against Vericrest is the threat of letting a property go into foreclosure. Vericrest appears to be unimpressed by accusations of predatory lending.
We settled a Vericrest modification in September of 2009. This was a rental property which was around $50,000 underwater. The Borrowers were both on disability and had not made payments for nine months. The balance increased over this period from $404,000 to $433,000. This was a 3/1 ARM loan with a fixed rate for three years at 8.6% per year. Thereafter the interest rate was to be based on the one-year LIBOR plus 5.1 points. Although the one-year LIBOR is currently under 1.5, it has been as high as 5.4 as recently as 2007.
The Borrowers bought this property on an owner occupied basis. They might have gotten a better modification if they had not rented the house and moved into an apartment, or if their lender had been subject to the Obama Plan.
The property was days away from foreclosure when we settled the modification. Fortunately, one of the Borrowers had gone back to work and income was sufficient to convince Vericrest that the Borrower could make payments.
Vericrest agreed to call off the foreclosure, add unpaid interest over the nine-month period to the balance, and give the Borrowers a 5.0% rate for two years. Thereafter, the loan will return to previous terms and will be subject to further negotiation.
Because of the fact that this was a loan with a lender which had neither accepted the TARP money nor signed onto the Obama Plan and the fact that the property was a rental, this was a not unreasonable resolution. Lowering the Borrower’s rate by 3.6 points saved him $31,000 over the coming two years.