In the Sub-Prime of Life

In many cases, the servicer is given a lot of flexibility to help borrowers out of a jam — that is certainly the case with the loan pool that Murray's loan fell into. For that pool, Litton is allowed to waive or defer missed payments and refinance loans once they go into default. It's because of this latitude that Litton CEO Larry Litton Jr. sees his company as the last line of defense for the borrower. And that's why, he says, Litton saved 70,000 people from foreclosure last year and is projected to save 95,000 this year. Unfortunately, he says, the satisfied majority is often overshadowed by the civil suits and online complaints of a bitter few who didn't like hearing that Litton wouldn't offer a free ride. However, it's difficult to tell if it's the borrowers who don't like what they hear, or if it's Litton.

Larry Jr. is a friendly guy with a twang who drifts in and out of a downright down-home feel when he talks about what his company does and his pride in that work.

Founded in 1988 by his father — “the most solid citizen you will ever meet,” Larry Jr. says — the company began with five employees handling a few thousand Texas loans. Today, Litton's 1,500 employees handle more than 300,000 loans in 50 states, making Litton one of the top 20 servicers in the country. The company consistently receives high grades from rating agencies like Moody's and Standard & Poor's.

Larry Jr. often finds himself playing myth-buster, trying to make people understand that Litton does not profit from foreclosure. He says that, with legal and real-estate-related fees, the company spends about $50,000 foreclosing a home. And while Litton might recover much of that from the sale of the house and the collection of those fees, Larry Jr. says it's not in anyone's interest to foreclose on a home.

“We would always rather have someone in that house, making a payment,” he says, adding later, “When the borrower don't pay, we pay...At any given time, we have half a billion dollars of our money outstanding that we've had to advance.”

And in the end, he says, “I sleep well at night. I believe we have the best business practices in the industry today. I think our people believe in those business practices — I'm very, very proud of that.”

When Larry Jr. and Litton publicist Donna Marie Jendritzen said they wished the media could hear from some of the 70,000 borrowers whose homes Litton saved last year, the Press asked how that wish could be fulfilled. What resulted might be indicative of an apparent disconnect between how Larry Jr. believes his collectors treat borrowers and how they are actually often treated.

Jendritzen said federal privacy laws would make it difficult to find some satisfied souls to talk, but she would see what she could do. Ultimately, she rounded up two borrowers in Cleveland, Ohio, who explained, or tried to explain, their loan histories in a conference call.

The borrowers were calling from the offices of a nonprofit housing advocacy group called East Side Organizing Project, which acts as a liaison between distressed borrowers and their servicers. Only one of the two borrowers said he resolved his issues directly with a Litton representative. In that case, Antonito Bradley fell behind a number of times over a two-year period. Litton ultimately waived his fees and knocked $21 off his monthly payments; the missed payments were calculated back into the principal. He does not expect to fall behind again.

“They gave me a second chance, basically,” he said.

In what was supposed to be the second testimony to Litton's ability to work with borrowers, Luvonia Menefee said Litton doubled her monthly payment without telling her why.

“They upped it to $1,400 [from $669],” she said. “I wondered, ‘How could you do this?' And then that was when I could not get nobody, you know, to call back. It was always, ‘I'll call you back.' I couldn't get no explanation, so I stopped paying.”

Menefee said that, while she had the money, “I was not going to send money somewhere where no one could tell me where it was going.”

After seven months of not paying and not getting an explanation for the increase, she was notified that Litton was going to foreclose.

“Finally, my brother-in-law told me about ESOP,” she said, “and this is when I went to them. And they was like my communicator.” ESOP got on the horn to Litton and got them to knock $1,026 off her monthly payment.

“If it wasn't for ESOP, I wouldn't have been...able to smile again,” Menefee says.

When asked if a Litton borrower could get the same results if they weren't lucky enough to live in Cleveland, with ready access to ESOP, she said, “It's hard to say.”

To get more positive statements about Litton's willingness to work with borrowers, one would need to check the company Web site's “Customer Testimonials” section, the title of which erroneously implies that Litton's customers are the borrowers and not the sellers and investors perched at the top of the ladder.

Some examples: