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Live Well Financial forced into involuntary bankruptcy

Judge grants creditors' petition to push lender into Chapter 7 liquidation

Live Well Financial has officially entered bankruptcy protection, as a Delaware judge granted a petition Monday that forces the defunct lender into Chapter 7 involuntary bankruptcy.

Virginia-based Live Well originated traditional and reverse mortgage loans as well as FHA and VA loans, and was also an issuer of mortgage- and reverse mortgage-backed securities.

The petition seeking Chapter 7 protection was filed June 10 by three of Live Well’s creditors – Flagstar BankMirae Asset Securities and Industrial and Commercial Bank of China Financial Services, who were later joined by a fourth creditor, Five Elms Capital. 

Together, the four said they were looking to retrieve the collective $130 million-plus they said they are owed since Live Well went bust in early May.

Now, it seems may see at least some of that money back, as Live Well is forced into court-supervised liquidation, with the judge appointing Delaware lawyer David Carickhoff, who specializes in corporate bankruptcy and business reorganization, as interim trustee.

Court documents also reveal that Ginnie Mae began taking steps on June 26 to terminate and extinguish Live Well’s interests in various Ginnie Mae mortgage-backed securities pools, including the company’s origination and servicing rights.

In light of this, Live Well filed a notice with the court stating that it would not contest to the relief brought on through the involuntary petition.

This is just the latest development in a long saga that began May 3 when Live Well took the industry by surprise by announcing that it was shuttering operations effective immediately and subsequently laid off 103 employees.

A legal petition in Delaware bankruptcy court seeking to force Live Well into involuntary bankruptcy ensued, and possible criminal investigations came to light, with two creditors stating that the Federal Bureau of Investigation and the Securities and Exchange Commission are looking into Live Well.

In those filings, both Mirae and Flagstar said they had been contacted by authorities about the lender. Mirae also said it had been contacted by the Assistant U.S. Attorney from the Southern District of New about a potential investigation into the defunct lender.

Those filings also contain accusations of mismanagement on Live Well’s behalf.

In its affidavit, Flagstar said, “There are serious questions regarding the management and control of the debtor, its ability to protect and preserve assets (including any potential causes of action that may exist as a result of Live Well's activities), and liquidate in a manner that will maximize value for its creditors and other stakeholders.”

Live Well hotly contested this suggestion.

“Delayed communications during a period when Live Well was in severe financial distress, however, is not evidence of management mismanagement and is not the basis for the ‘extreme remedy’ of the appointment of an interim trustee,” the company stated.

Live Well went as far as to assert that the creditor’s motives were verging on the personal: “To be sure, the true purpose of the Petitioning Creditors’ Trustee Motion is not to 'preserve,' but rather to punish Live Well’s management and to oust them from the company.”

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