In the wake of the arrest of former reverse mortgage executive Michael Hild, the ongoing saga related to the forced Chapter 7 bankruptcy of his former reverse mortgage company Live Well Financial has continued.
One of the company’s former financiers is now gaining access to over half of what it is owed by Live Well. This is according to court documents obtained by RMD and original reporting from the RichmondBizSense publication.
At the same time, a federal bankruptcy judge has assigned a new servicer to the company’s outstanding loans, based on an additional filing.
Flagstar secures over half of Live Well’s debt to it
As previously reported, Michigan-based Flagstar Bank filed a suit in federal court in May seeking repayment of nearly $70 million in delinquent loans and interest. Just prior to Hild’s arrest, Flagstar won approval in bankruptcy court to take control of a $37 million bond account that Live Well had owned, according to a story in RichmondBizSense and court documents obtained by RMD.
“That account, held at U.S. Bank, had been used as collateral on a $70 million loan Live Well borrowed from Flagstar in 2017,” writes the outlet’s Michael Schwartz. “Live Well defaulted on the loan in May, prior to its seemingly sudden collapse into bankruptcy, which was prompted by a petition from three of its largest lenders, including Flagstar.”
As the Chapter 7 case was unfolding, the federal judge overseeing it put a freeze on Live Well’s assets in order to allow a court-appointed trustee to sort out the disorder left in the wake of Live Well’s abrupt closure. During that entire period, however, Flagstar argued that it had a rightful, secured interest in the relevant bond account.
“A judge agreed, allowing the bank to essentially foreclose on the account, liquidate it and use the proceeds toward the $68 million balance that’s owed on the loan,” writes Schwartz.
The liquidation of the account will be overseen by the court-appointed trustee, David W. Carickoff, and Flagstar will incur the costs of Mr. Carickoff’s assistance in the account’s liquidation based on the early August court filing.
During that time, Flagstar also personally sued Michael Hild, Live Well’s former CEO, alleging that he had personally guaranteed the loans. As previously reported by RMD, Hild has denied these allegations and has sought to have the case dismissed with prejudice, so that these allegations could not be brought to court again.
Meanwhile, Hild and his wife recently opened a new brewing company and restaurant in Richmond, just about a month prior to his arrest by the FBI for alleged securities fraud, according to RichmondBizSense.
Fannie Mae seeks new servicer for Live Well mortgages
In a motion filed in August, the Federal National Mortgage Association (FNMA, or “Fannie Mae”) sought to assign legal title to the mortgages in Live Well’s servicing portfolio to a new servicer.
That motion was granted by the presiding judge, releasing the relevant mortgages upon payoff and transferring certain custodial accounts that hold borrower payments for principal, interest, tax and insurance escrow amounts to new servicers. According to the language of the court order, it appears that LoanCare, LLC will be taking on servicing responsibilities for Live Well’s forward portfolio, while Compu-Link Corporation (Celink) will be taking on the same responsibilities for the reverse mortgage portfolio, though specific details regarding the agreements between the various entities were not available.
When contacted by RMD, representatives for both Celink and LoanCare declined to comment on any matters concerning the servicing of Live Well’s reverse and forward portfolios, respectively.
The order also instructs both LoanCare and Celink to relinquish all books, records and data pertaining to Live Well’s servicing portfolio. The court authorizes Fannie Mae to, “take all actions necessary to implement the terms of this Order,” the court filing reads.
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 followed by more than 100 lay-offs at the company’s Richmond, Va. headquarters, which led to the filing of a class action lawsuit from a former employee attempting to recover lost wages. Live Well intends to challenge that suit.
Counsel for the creditors involved with the forced bankruptcy filing have also indicated that Live Well’s financial activities have gained the attention of both the Federal Bureau of Investigation (FBI) and the Securities and Exchange Commission (SEC), both of which are conducting separate investigations into the company and its former CEO Michael Hild, according to court documents.
The FBI arrested Hild for alleged securities fraud at the end of August, while also charging two other former Live Well executives who are reportedly cooperating with federal authorities. Hild is currently out on an unsecured $500,000 bond awaiting an additional court appearance in New York later this week.
Multichannel lender Open Mortgage also announced in the wake of the Live Well closure that it had hired the core team of mortgage lending executives from Live Well, in addition to approximately 50 former Live Well sales and operations employees to expand its retail, wholesale, principal agent and closed-loan seller mortgage channels.
Due to its origination volume prior to closing, Live Well Financial is still technically a top 10 reverse mortgage originator based on the July endorsement data by Reverse Market Insight (RMI). It was ranked at number 7 as of July with 1,062 endorsements in 2019.