Seeking Loan Repayment, Flagstar Files Suit Against Live Well CEO

Following the sudden closure of top-10 reverse mortgage lender Live Well Financial, the company’s CEO is being sued by one of the company’s creditors.

Last week, Michigan-based Flagstar Bank filed a suit in federal court, seeking repayment of more than $80 million in delinquent loans and interest, according to a court filing made with the U.S. District Court for the Eastern District of Michigan, obtained by RMD and first reported by the Richmond Times-Dispatch.

Flagstar is seeking to compel Hild to repay principal, interest and expenses, comprising a warehouse loan and a commercial loan. Before filing their suit directly against Hild, Flagstar had previously disclosed that it had been opened up to new financial exposure of around $74 million, which it attributed to a $69 million commercial loan and a $5 million warehouse line.

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While the exposure details omitted the company that Flagstar had attributed the vulnerability to, analysts at the time believed the company to be Live Well Financial. The bulk of this previously-detailed exposure aligns with the amount that Flagstar is seeking on the commercial loan amount made to Live Well before the addition of interest.

In November 2016, Hild delivered to Flagstar an agreement guaranteeing payment of “all indebtedness obligations, and liabilities of [Live Well] to Flagstar,” according to the court filing. In March of 2017, a $50 million commercial loan agreement was signed, which was amended shortly thereafter to $70 million.

However, because Live Well ceased its operations earlier this month, this led to one or more “events of default” under the loan agreement, the lawsuit alleges.

“On May 10, 2019 Flagstar accelerated and demanded payment in full of the obligations,” the filing reads. “Flagstar also informed Live Well and [Hild] that interest would now accrue at the default rates under the loan documents.”

The total amount owed to Flagstar on the commercial loan, including both the principal amount and interest, is $69.2 million. The warehouse loan principal amount and interest Flagstar is seeking totals $13.3 million, according to the court filing.

This is the latest in a series of unfolding events concerning the abrupt closure of Live Well Financial, which RMD learned about on May 3. The closure was quickly followed by more than 100 lay-offs at the company’s Richmond, Va. headquarters, which included Hild.

This was quickly followed by the filing of a class action lawsuit by a former Live Well employee, who alleged that the terminations made by the company were without cause and notice as required by law.

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