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The Mortgage Graveyard
Failed, closed and a c q u i r e d mortgage-related entities.

Bankrupt Firm Accused of Secondary Fraud

Liberty Mortgage Funding files bankruptcy

September 10, 2008

By staff

A Kentucky mortgage company that filed for bankruptcy liquidation is accused of defrauding lenders it sold loans to. As many as 100 employees may have been impacted by the company's collapse.

Prajna Group Inc., which did business as Liberty Mortgage Funding, filed for Chapter 7 bankruptcy last month, according to a copy of the bankruptcy petition filed in U.S. Bankruptcy Court, Western District of Kentucky.

The Louisville-based firm, which incorporated in the state of Illinois, said it owed less than $1 million to fewer than 100 creditors -- though that amount is in dispute.

Mortgage companies listed among the creditors included Countrywide Bank, Fannie Mae and New Century Financial Corp. Mortgage insurers listed were MGIC Investors Servicers, PMI Mortgage Services Co. and Radian Services LLC. Service providers listed included AllRegs, Loan Tool Box, MERS and Mortech. Warehouse lender First Collateral was also listed.

Robert V. Lloyd was listed as Liberty's president, while other filings indicate the company is owned by Mr. Lloyd and Bounmy Phouthavong.

An emergency motion was filed by Texas Capital Bank, which claims to be the biggest creditor in the case. That filing indicated loans Texas Capital had acquired from Liberty may have also been sold to other institutions.

"Texas Capital also states that it has received an anonymous allegation from an individual claiming to have worked for Prajna that Prajna has defrauded Texas Capital," the motion said.

The bank said it has been stonewalled in its attempts to find out more about the status of the loans. It noted that the bankruptcy trustee has required the landlord to change the locks of the office, but security claims this cannot be done because Liberty employees still occupy the office. They allegedly are entering and leaving freely.

One creditor filing, by Porsche Financial Services, indicated Liberty is still in possession of and using a Porsche 911 valued at $114,000 and three Porsche Caymans valued at $43,375 each. Meanwhile, loans totaling more than $250,000 remained unpaid.

Published reports put the number of Liberty employees at between 50 and 100.

On its Web site, Liberty touted loan programs that offered "up to $5,000 cash back at closing." Advertisements indicated the company also provided credit repair.

WHAS News 11 reported that the FBI is investigating Liberty.

Prajna Group Inc. d/b/a Liberty Mortgage Funding
Case 08-33673, Aug. 20, 2008 (U.S. Bankruptcy Court, Western District of Kentucky)

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