Optimum First Mortgage Partner, Flagstar Bank, Disposes of Live Well Financial Exposure

Flagstar Bank is a wholesale mortgage partner with Optimum First Mortgage. After disclosing that it had endured a $74 million financial exposure in the wake of Live Well Financial’s abrupt closure this past May, Flagstar Bancorp has announced that it has now shed all of the securities that served as collateral for its loan to the now-defunct reverse mortgage lender.

Flagstar detailed that the burden of the exposure has been overcome while Flagstar itself continues cooperating with authorities seeking fraud charges against both Live Well at-large and its former CEO, Michael Hild, specifically. The announcement was made in a press release issued last week, which announced the sale of the affected assets.

“I am very pleased to have put this situation behind us,” said Alessandro DiNello, Flagstar president and chief executive officer in the press release. “Criminal and civil legal proceedings are progressing as expected against Live Well and its principals. We continue to cooperate with prosecutors and the SEC, and will otherwise actively pursue all legal remedies available to us.”

Flagstar first publicly disclosed that it endured the financial exposure just over a week after Live Well abruptly closed its doors, stating its plan to “pursue all available sources of collection including other assets of the company, a personal guarantee and other legal remedies to minimize our credit exposure related to this loan,” according to a 10-Q filing with the Securities and Exchange Commission (SEC)
in May.

Later that month, Flagstar filed suit against Live Well, seeking direct repayment. Shortly before federal authorities arrested former Live Well CEO Hild on charges of securities fraud in August, Flagstar won approval in bankruptcy court to take control of a $37 million bond account that Live Well had owned. That bond account comprised over half of what Flagstar was owed by the reverse mortgage lender, culminating in the sale of the remainder of the collateral last week.

This is the latest development in the ongoing story related to the abrupt closure of Live Well Financial. In addition to arresting Hild, federal authorities also charged two other former Live Well executives with similar charges, and they are reportedly cooperating with investigators. Hild was released from custody shortly after his arrest on an unsecured $500,000 bond.

After a subsequent court appearance, Hild has pleaded ‘not guilty’ to the charges against him, and a federal judge has set a trial date for October, 2020.

Due to its origination volume prior to closing, Live Well Financial is still technically a top 10 reverse mortgage originator for 2019 based on August endorsement data compiled by Reverse Market Insight (RMI). It was ranked at number 8 as of August with 892 endorsements over the prior 12 months.