Flagstar Bank expects to recover $1 million of its loan to defunct reverse mortgage lender Live Well Financial following the sale of the collateral that secured it.
Following the sale, Flagstar has no further exposure to Live Well, the bank said in a press release. In its first-quarter 10-Q filing, the Troy, Mich.-based company reported it had a $69 million outstanding loan to a then-undisclosed reverse mortgage lender that was shutting down.
The collateral securing that loan had a fair value of between $35 million and $40 million.
“I am very pleased to have put this situation behind us,” said Alessandro DiNello, Flagstar president and chief executive officer. “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 will include the recovery in its third-quarter results. In the second quarter, Flagstar took a $30 million partial charge-off related to the Live Well loan.
“While any additional recoveries are uncertain, we are confident in the merits of our case and, considering assets identified by the government, are hopeful that we will realize additional recoveries,” DiNello said.
Live Well, based in Richmond, Va., stopped originating loans on May 3. In June, the company’s creditors, including Flagstar, filed a petition to force the company into involuntary bankruptcy, a motion the court granted one month later.
Live Well’s former CEO Michael Hild was subsequently charged with misrepresenting the value of a bond portfolio by federal prosecutors in New York, along with the Securities and Exchange Commission. Two other Live Well executives pleaded guilty to the charges.