First Franklin filed a lawsuit in U.S. District Court in Boston against the mortgage broker operation that originated the loan for Hardy, seeking to recover the money it lost on the sale of Hardy’s mortgage. That company, National Lending Corp., based in Houston, operated several offices in Massachusetts, but the state’s division of banks didn’t hit the brokerage with a cease-and-desist until September 2006—several months after Hardy got her mortgage. National Lending Corp. closed its Massachusetts offices and terminated all of its employees, court records show. Katherine Le, who served as an executive director at the company, said it was First Franklin’s job to verify the income of a prospective borrower.

“We didn’t have the final say-so on any of this stuff,” Le said. “If you had a pulse, they approved you.”

U.S. District Judge William Young recently ruled against National Lending and awarded a default judgment on behalf of First Franklin. With interest, the mortgage broker owes close to $400,000 with interest accruing at 12 percent annually.

Jeffrey Novins, a Boston attorney representing First Franklin in the case, said National Lending still has not satisfied the judgment.

“I’m not sure what assets they have,” Novins said.

Le said National Lending ran out of money and went out of business in 2006.

As a postscript, Merrill Lynch discontinued First Franklin’s operations in early 2008. But First Franklin’s legacy still looms large for Bank of America Corp., which bought Merrill Lynch in a hastily arranged deal in the wake of Lehman’s collapse last September.

New York Attorney General Andrew Cuomo is investigating why Bank of America and Merrill failed to disclose, before a shareholder vote, that Merrill needed to take a $2 billion-plus charge against earnings in connection with First Franklin’s failed operations. In a recent letter to Bank of America, Cuomo’s office said Merrill knew it would need to take the charge before shareholders approved the combination in December. The First Franklin write-down was part of a massive fourth-quarter net loss of $15 billion at Merrill Lynch.

Two months later, Merrill revealed in its annual report for 2008 that there were about $36 billion of outstanding loans that First Franklin sold in various asset sales and securitizations where “management believes we may have an obligation to repurchase the asset or indemnify the purchaser against loss.”

Merrill Lynch said it has set aside $560 million in reserve to absorb potential liabilities related to First Franklin’s activities.

Meanwhile, the two-family at 13 Essex Street in Revere also changed hands a couple of times.

A North Andover man bought the property out of foreclosure in April 2007 for $306,000, according to Suffolk County real estate records. That’s $364,000 less than First Franklin’s original mortgage on the property. And several months later, the North Andover man then sold the two-family to a couple for $470,000, records show.