Live Well Financial’s abrupt closing leads to host of problems

Servicing

Live Well Financial abruptly shuttered operations earlier this month, blaming unforeseen market conditions and regulatory issues that rendered the company without sufficient capital to continue funding traditional and reverse mortgage loans.

These “unexpected circumstances” caused the Virginia-based lender and servicer to close up shop, laying off 103 employees without much notice.

But now, the company has to deal with the damage left in the wake of its decision to abruptly close – and it looks like the clean-up will likely be expensive.

On Monday, Flagstar Bancorp revealed in a Securities and Exchange Commission filing that Live Well owes the bank $74 million, which includes $5 million in a warehouse line of credit.

While the bank said it expects to see the $5 million line of credit repaid in full, it’s not so certain about the remaining $69 million commercial loan, which it said has an estimated collateral value of $35 to $40 million.

Flagstar said it’s too early to determine the extent of the loss it will likely endure as a result of Live Well’s closure, but it pledged 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.”

Meanwhile, former Live Well employees are seeking damages for lost wages.

Last week, a former loan account manager who worked in the company’s Richmond, Virginia, office filed a class-action suit against the company in Delaware for firing more than 100 employees without warning.

According to Law360, the suit alleges that Live Well violated state and federal WARN act mandates that require companies to grant employees 60-days’ notice before issuing mass layoffs. The suit is seeking damages for unpaid wages.

Live Well announced May 3 that it was closing down, leaving the only explanation for the unexpected move in a letter to the Virginia Employment Commission.

“Due to sudden and unexpected developments in the markets for certain financial assets the company uses as collateral for certain credit facilities that provide this liquidity, these lenders have reduced significantly the amount of liquidity they make available to the company,” wrote Paula Foster, Live Well’s VP, controller and human resource director.

“This reduction in credit availability combined with challenging conditions in the markets for mortgage loans, which were conditions outside of the company’s control, along with related regulatory issues, have resulted in the company having insufficient available cash to continue operations,” Foster continued.

“Despite the company’s exercise of commercially reasonable business judgment, it could not reasonably foresee these circumstances and therefore was unable to provide 60 or more days notice of the closing and related layoffs,” Foster added.

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