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Debra Murray may have saved a lot of homes from foreclosure, but she couldn't save her own.

As a research specialist for Houston-based Litton Loan Servicing, a mortgage payment collection agency, Murray was in charge of combing through troubled loans to see what went wrong where. Every month, more than 300,000 borrowers throughout the country are obligated to send monthly payments to Litton, totaling a portfolio of $43 billion.

With that many payments, mistakes are unavoidable. And in the world of subprime loans, a simple error such as a misapplied payment can snowball into a force that knocks a customer out into the street. If the simple error isn't caught in time, the customer can be royally, if not legally, screwed.

It was Murray's job to catch these mistakes, notify the proper departments and stop the foreclosure machine.

Murray says there were more than enough mistakes to keep her busy. She wrote letters to borrowers explaining discrepancies and detailing their loan status, and Litton graded her punctuation and grammar monthly. With a red pen, Murray's department supervisor would scold the researchers for misplaced commas and dangling participles, ignoring the fact that they might have saved a borrower's home from foreclosure.

Like many of the people whose loans she investigated, Murray was a first-time homeowner with a subprime loan. In 2004, three years after she started at Litton, Murray, her husband and their three adult sons moved into a four-bedroom home in a quiet subdivision in southwest Houston. She entered into the kind of adjustable rate mortgage behind the surge of 1.2 million foreclosures for 2006; the kind with a sweet two-year teaser rate that would mushroom in month 25 and reset every six months beyond. In Murray's case, that meant a jump from a 7.3 percent interest rate in March 2004 to about 11.3 percent by February 2007.

But Murray's troubles started well before month 25.

Like every other subprime borrower, Murray has no control over which company services her loan. That decision is made by investors who might never meet the borrowers but who know their profile: Their credit is spotty, their paychecks are modest and there's a good chance their skin is of a darker hue. And despite the fact that Murray is incorrectly listed as “white” on her loan application, she fits that profile.

Murray's loan wound up in a $900 million pool of mortgages and other receivables that back bonds sold by Lehman Brothers. That pool was originally serviced by Ocwen Financial but was ultimately switched to Litton. Besides servicing subprime loans, Litton also invests in about 80 percent of its portfolio through parent company C-BASS.

As soon as Murray found her loan had been switched to Litton, she wanted it transferred. She believed that Litton made too many mistakes, and she didn't want to wind up like one of the borrowers in her thick stacks of troubled loans. She says she talked with superiors who said the loan could not be transferred.

A sinking feeling became outright panic, Murray says, when her husband and two of her sons lost their jobs and she defaulted on her loan — well before her teaser rate expired. (One of her sons had worked at a law firm that files foreclosures for Litton).

“I know they're going to fire me — that's the first thing you think in your head,” she recalls months later. “They don't want this.”

She was right. After falling four months ($4,000) behind, Murray was fired, and Litton began the process of repossessing her home. She's now one of the Litton borrowers seeking class certification in a lawsuit filed in a California federal court. They accuse Litton of forcing them into foreclosure by assigning predatory fees. And those who talk to Murray often walk away with one question: If that's how Litton treats its employees, how does it treat debtors it doesn't even know?

Texas reported 156,876 foreclosures in 2006, more than any other state, according to foreclosure marketplace tracker RealtyTrac. That's one out of every 51 homes, giving Texas the fourth-highest foreclosure rate in the country.

Depending on whom you ask, the subprime loans behind many of these foreclosures are predatory packages destined for failure, a saving grace for people who've been turned away from conventional loans or a conspiracy among the shadow-cloaked cabal comprising the investor-lender-broker-underwriter complex.

If the foreclosure boom associated with the subprime market were the work of one master power like the Illuminati, things might be easier. Instead, the market is a constellation of dubious lenders, brokers, servicers and investment trusts, each of which has just enough involvement to make a bundle and just little enough to plead plausible deniability when the whole structure collapses.

However, there are those who say that not all subprime lenders are predatory, and that these loans can work well for responsible people with realistic expectations.

Denetta Williams, the broker who helped close Murray's loan, says that while there are genuine victims of subprime lending, Murray wasn't one of them. She says Murray would've qualified for a conventional loan on a smaller house, but was dead set on a four-bedroom, $127,000 home. Moreover, the loan's 7.3 percent introductory interest rate was more than fair, Williams says.

Williams, who is black, says that while there are blacks who have been outright ripped off by predatory lending, the subprime market has also given the black community a chance it didn't have before. In many cases, she says, the sob stories that drive media reporting are examples of basic whining, not victimization.

“Nobody made them go and buy that house,” she says, later adding that when the “underclass” blows a true opportunity, they make it a “‘poor me' situation...It's the American dream. They're giving you a chance. And time after time they blow it and then they go and blame the establishment. And it's not the establishment.”

Write Your Comment show comments (9)

  1. I worked in the mortgage industry for several years. I started as a customer service supervisor in a call center and worked my way to loan officer before I left the industry hopefully for good. Anyway, I know that many people go through hard times, but whatever the case is, you must always try to pay your house note. You signed an aknowledgement of debt, and it is your responsibility to repay that debt at all cost. Federal guidelines allow a mortgage company to start foreclosure proceedings at 60-90 days past due. Having said that, I would say that if you are 4 months late on your house note and your mortgage company is just now beginning foreclosure proceedings on you...you are pretty lucky in my book.

    Comment by Wes — May 17, 2007 @ 10:32AM

  2. Wes, what about homeowners who must deal with mortgage servicing companies similar to Litton that do all that was described in this article, PLUS lie about misapplying payments, commit perjury, and hire lawyers who make physical threats? That's what happened to me, and I lost my home in spite of the fact that I made payments on time for seven years. Then the mortgage is sold, and a new Mortgage Servicing Agent begins threatening foreclosure before I am even informed that they are the ones now processing payments. I would guess this happens a lot more than the mortgage industry is willing to admint, and I know the mainstream press doesn't report it.

    Only in America can someone pump The Dream up your backside and then steal your home in spite of receiving payments on time.

    Comment by Bill — May 21, 2007 @ 12:48PM

  3. I am one of the 280,000 Federal trade Commission-certified victims of Fairbanks Capital Corp as certified in USA/Curry v. Fairbanks as mentioned by Mr. Litton. Personally, I'm tired of the industry standard line that "no one makes any money on foreclosures." I will concede that the LENDER may not make any additional money on a foreclosure action - but they aren't losing any money either, especially if the loan in default has been securitized. Contrary to Mr. Litton's claim, the longer that a mortgage servicer can keep a borrower in default the more money the servicer can make.

    In order to back up my claim all one has to do is go to www.sec.gov, look up the prospectus for any given REMIC and read the Pooling and Servicing Agreement for that REMIC. I've read dozens of prospectuses over the last year or so and virtually every PSA language is inserted that authorizes the mortgage servicer to keep any additional fees - such as assumption fees, modification fees, *late payments*, etc. AS ADDITIONAL SERVICING COMPENSATION. I have one of those statements in the Merrill Lynch Mortgage Investors REMIC in which my own loan is bundled. Yes, there are obviously always exceptions to the rule but I would go as far as to say that this type of language is "boiler plate" in PSAs.

    Now, having said that, there are far more "legitimate" foreclosures taking place than illegal ones. The law of big numbers states that. And in the current sub-prime "implosion" there is blame for everyone. Lenders for creating the "exotic" mortgage products, brokers for steering borrowers towards the exotics where the broker makes more commission, and borrowers themselves for attempting to live beyond their means and wanting a larger piece of the "American Dream" than they could realistically afford.

    HOWEVER, when the mortgage servicer manufactures the default - as was done in my own case and of which I have proof - the only entity deserving of blame - and possible criminal charges - is the servicer. Period. Litton's PR spin and EMC's "Mod Squad" are nothing more than smoke and mirrors devised to distract attention from the fact that some mortgage servicers are operating on a business platform designed for the same results that Fairbanks' platform was - their own bottom line.

    This is a "property laundering" scheme. Hold a borrower in some stage of default for as long as possible in order to bleed as much money from them as possible. Once the borrower can no longer come up with the late fees and modification fees and forbearance fees they are no longer of use to the servicer's bottom line. It's then time to foreclose on the property in order to get it off of the lender's and the servicers books and get rid of the "evidence". But the servicer STILL isn't done making money. In many cases, in that same PSA mentioned above, the servicer is given right of first refusal to purchase the foreclosed property. That just adds insult to injury in many cases as the servicer has already made money hand over fist from the borrower during the "default" process. NOW the servicer gets to sell the property itself most likely recovering attorney’s fees, BPO fees (whether they were allowed to charge those to the borrower per the borrower’s note or not) force placed insurance fees, etc. And if the entire amount owed isn’t recovered at the sale the servicer can either go after the borrower for the difference or they can choose to “forgive” the difference – in which case the servicer will report that difference to the IRS who will look at difference as income and will tax it accordingly.

    Mr. Litton, don’t tell me that there is no money in foreclosures. Otherwise, the law firms that Litton employs would not be members of organizations like the United States Foreclosure Network. How much money is Litton making on a monthly basis. At their peak, Fairbanks was pulling in roughly $100 million per month. How are you doing in comparison?

    For more info on my own case or if you have questions, please feel free to visit me at http://www.getdshirtz.com . After all, all you have to lose is your home.

    Comment by Mike Dillon — May 21, 2007 @ 09:50PM

  4. I am a 56 year old woman. I've owned my own homes since I was 21. My first marriage didn't work out, I had been single from age 30 to 54. I raised two children as a single parent. I received $6500 (six thousand, five hundred) grand total for child support during the time my children were growing up. I had a steady income from my job at at utility company and I cleaned houses every other weekend. The point I am trying to make is that I am a responsible adult. Unfortunately, I have needed most of my income to make monthly expenses and seldom have a large amount saved. I am a sub-prime borrower because of my income to debt ratio. I refinanced my house four years ago, I had impound accounts, etc. I was paid bi-monthly. My first check has always gone to mortgage payments. When Litton assumed servicing my loan it was HELL. I have a 15 day grace period. Litton starts calling to ask where their money is after four days (meaning that the payment was due on the first, the phone calls started on the fourth). Litton would call every day, even after they received their check and cashed it. Litton's call record for me is three times in the same hour and five times in one day. When I gave them information (ie, check has been maild, will be mailed, etc) it was never recorded, they just kept calling. I was very late one month because my car was totalled in a mud slide and I had to get it fixed so I could get to work. I called Litton right away and asked if I could make the payment late or spread it out over a series of months (at this time they did have a hefty impound accout of mine). I told them I was taking out a personal loan with my credit union, which usually takes about three weeks. Litton kindly told me that I could make the payment or they would start forclosure. Litton also "hold ons" to your checks. My checks would often be cashed two weeks after Litton received them I started sending checks express mail, with a returnd receipt. The peace of mind was worth it. I tried paying electronically - my plan being to set up a monthly automatic withdrawl. On the second month I made the July payment on June 30th. After taking their impounds off the top they applied the rest of the payment to principle. I called daily and wrote several times a month trying to get them to fix their mistake It took them six months (finally made right on Dec 27. Litton did keep the late fees assessed and has never sent me any communication that a mistake had been made. As soon as the prepayment penalties were up I refinanced my house again. My loan was expensive and I am paying a higher interest that I would have had my previous lender been more honest. It is so worth it. Litton still owes me money which I doubt I'll ever see. At the time my house was refinanced I owed approx $119,000 on it. My house appraised for $420.000. Litton said they don't make money on forclosures! In what universe? I don't even have a comeback for that remark. I'm just glad they aren't my lender anymore. If I ever make it to Houston I will probably visit their headquarters, see how the "research" on my refund is coming along and hopefully get my picture taken with Larry Jr. I am morbidly curious about a man who could do the things he does and pit his name on the company.
    Sincerely, Judith Hess-Andor

    Comment by Judith Hess-Andor — May 22, 2007 @ 12:52AM

  5. Beware Litton's latest effort to shut-up its "customers", which is to send out a letter asking you to fill out a form explaining all your problems in life and sign your name to it in exchange for some potential leniency in paying Litton. Don't fill this form out and don't send it in! The goal with this form Litton is sending out is to get you to "judicially admit" in writing that you, as the homeowner, are solely responsible and liable for all the fees Litton has charged you. Thusly, Litton can present this form in court to avoid liability for their servicing scams.

    Enron, like Litton, was based in Houston, Texas. Litton has the potential to be the next Enron. Government regulators need to take a good long look at Litton's financials and ask themselves: If Litton is not the lender and must pay most of the money it recoups by selling foreclosures to the actual lender, how does Litton make any profit at all to justify paying (allegedly) 1,500 employees AND also be able to pay executive bonuses to Larry Litton, Jr. and others? The answer, as simple math will show, is illegal fees totalling thousands of dollars that are crammed onto its customer's bills that Litton skims right off the top of every loan it services "on behalf of the lenders".

    Litton is owned by a New York company named "C-BASS". Why does a New York company need a Texas-based mortgage servicer? Simple. Texas allows non-judicial foreclosures, which allow companies like Litton to sell homes without any court ever knowing about it and allows companies like Litton to illegally sell people's homes with little or no actual notice to the homeowner.

    Comment by Patrick — May 25, 2007 @ 02:33PM

  6. Lets see it cost them 50 grand to go into forclosure so they still make a profit off each house or find a 16 dollar change and they want blood
    I have never had a nice moment with Litton ,and there are more on line with the same problems and they do not do loans they will tell you that on the phone ,,,,,,,,

    Comment by Ohgorsh — July 3, 2007 @ 05:19PM

  7. My loan was transferred to litton in October of 2006,immediately there were problems because I was given an incorrect loan number & received a late notice.That problem was resolved & than there was another problem my loan payment was 2039.52 a month.I received a letter from Litton in December advising me that I did not have enough escrow.I could pay it in a lump sum or pay the new loan amount.I sent Litton loan a copy of the 1098 stating that Security Atlantic my former mortgage company had transferred escrow to litton in the amount of 1637.My correspondence was never answered & I continued to be charged the 2152 loan payment.In March of 2007 my brother was hit by a car in Dallas Texas,I used the mortgae payment to help pay for funeral expenses & I was 60 days behind I RECEIVED A NOTICE TO ACCELERATE if i did not make payment by April 16.I called Litton on March 20 & expalined the tragedy regarding my brother.The rep was fairly understanding & ? WHEN COULD I MAKE A PAYMENT I advised I would be able to make 1 payment on March 29.He advised that would avoid the foreclosure & he took a lot of financial information over the phone.He told me I was not qualified for a repayment plan because of my low income but since my rate was so high a financial package would be mailed I was releived to say the least but on April 16 I received notice to accelerate again. It was impossible to get caught up after helping with my brothers funeral expenses & i am retired from Verizon & working part time. I received the foreclosure summons on June 24. On june 17 Litton sent one of their loss mitigation specialist to evaluate the inside of my home i beleive this is called a PBO OR SOMETHING. He took pictures I advised him I did not want to sell my home.
    I have answered the foreclosure summons,I sent the court a copy of the 1098 also all corrrespondence I received from Litton . I worked very hard for my little house.I want to keep it.There is more to this story.The summons is from Mers on behalf of Security Atlantic Mortgage Comany.I googled & Security Atlantic Mortgage had a problem with HUD & had to pay some fines.I was charged points on my loan 4300 . There was no mortgage note with the summons. I am not 100% right but why should litton be getting away with this.
    Litton bought the loan from Security Atlantiv why is mers on the summons? I need a lawyer for September 26. I am going to HUD, the FTC, THE FBI.I want to keep my home & enjoy the rest of my life.I never received the financial package from Litton THAT WAS SUPPOSED TO BE MAILED. I am looking to keep my home ,pay a rate lower than 11.75 %.
    I beleive my summons is from Mers on behalf of Security Atlantic Mortgage because Littons reputation & class action law suits does not make them very reputable.They have hurt people in New Jersey I hope i get a lawyer who can help me with this litton Ripoff loan.

    Comment by Carlyn — August 20, 2007 @ 09:29PM

  8. Litton Loan is the worst company anyone can ever deal with either as a customer or an employee. I used to work for them and I'm telling you, they are very evil, especailly those in the Atlanta office. We are asked to asked to tell customers to send request to the research department if there's any problem with their account, I guarantee you, you might need to send that request about 6-8 times and they still won't get to it. Personally, I had a problem with them asking us to call customers on the 4th of the month, when they have 15 days grace period! And they the reason why customers get calls like 10 times a day is because they tell us that if a customer hangs up on you note the account as a "No Answer", so guess what, the system automatically dials the number back in 5 minutes and will keep dialing it until the customer is forced to actually speak with you and make a promise when the payment will be made, which doesn't mean anything because unless you make a payment by phone, and get charged $9.99 for the process, they will call you back the following day!.....Imagine a company that keeps hiring new people on weekly basis but you tell the present employees that the company is overstaffed, so you are wacthing everything they do so as to get rid of some people! Just because they are paying the new employees less money, so they look for reasons to fire the good employees 'cause they believe they are making too much money.

    Comment by Tyler Durden — September 27, 2007 @ 01:33AM

  9. I found this online about Litton Loan

    http://littonloancrueltytoemployees.blogspot.com/

    Comment by Tyler Durden — September 27, 2007 @ 01:37AM

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