Liberty Mortgage Funding Co. - Retail

"If you got your home mortgage through Liberty Mortgage Funding Company, you won't be getting another one." That was the opener from WHAS 11 News in Louisville, KY on 2008-09-09. Reported as the area's largest mortgage broker with "up to 100" employees, Liberty Mortgage Funding Co. is out of business.

Prajna Group, Inc. d/b/a Liberty Mortgage Funding Company (LMF) filed for Ch.7 Bankruptcy on 2008-08-20 listing assets of less than $100,000 and liabilities reportedly under $1 million. Largest among the creditors are warehouse lenders First Collateral Services (FCS) and Texas Capital according to one source. Louisville's Courier-Journal, referencing a lawsuit filed 2008-08-05, states $2.2 million is owed to FCS.

"The suit alleges Liberty and its parent failed to properly document financial activities, and that Lloyd allowed Phouthavong to misstate the value of Liberty's collateral to secure certain loans."

Other sources indicate Texas Capital holds an even larger claim, and the court granted a motion for BK Trustee John Wilson to seize Liberty Mortgage Funding's files and electronic records on 2008-08-26, restraining LMF from further access to same. Liberty Mortgage Funding has been granted an extension of time to file supporting schedules to the BK until 2008-09-16. The Courier-Journal said Liberty Mortgage Funding's mortgage license "was suspended Monday [2008-09-09] by the Kentucky Office of Financial Institutions as part of an emergency order" issued in conjunction with the BK.

One curious thing we did find was this archived recruiting notice from August of 2007:

Aside from flirting bank tellers and Mafia comparisons, information on production volume wasn't available at the time of this writing. A former employee cited by the Courier-Journal contributed this:

"Liberty told state economic development officials in August 2006 that it expected to have 150 employees in Louisville over the next two years. The state approved $480,000 in incentives, but Ray Schnur, a four-year employee of Liberty, estimated the firm had 30 to 45 workers when he left in June.

The company did most of its work online, Schnur said, providing buyers with loans in Florida, Maryland, Tennessee, Kentucky and Missouri. Schnur said the Porsches were used as incentives for top loan officers, who typically made $35,000 to $70,000 a year depending on their performance."

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