Muncie-based-MutualFirst Financial has appointed Stacy Deitrich loan originator at the bank’s subsidiary, Summitmortgage in St. Joe, Michigan. She has worked in the mortgage lending industry for ten years.
In the latest event to unfold in the ongoing saga surrounding the May closure of Virginia-based lender Live Well Financial, three of the company’s former creditors are now seeking to use the court system to force the remains of the company into involuntary bankruptcy protection, using apparent investigations being made by regulators and federal law enforcement as reasoning for seeking the court-supervised liquidation.
As first reported by the Richmond Times-Dispatch and according to court documents obtained by RMD, the three petitioners – Flagstar Bank, Mirae Asset Securities Inc. and Industrial and Commercial Bank of China Financial Services LLC (ICBCFS) – claim that Live Well owes them a combined figure totalling over $130 million, with the debt coming from different financing arrangements Live Well engaged in with each creditor.
Each of the creditors have also been contacted by the Securities and Exchange Commission (SEC) and the Federal Bureau of Investigation (FBI) regarding the activities of both Live Well at-large, and former CEO Michael Hild specifically, according to an additional filing made on June 13 by the legal counsel representing the creditors.
Each of the three companies are petitioning the court to force Live Well into Chapter 7 bankruptcy protection, which is designed specifically for liquidation: the sale of a debtor’s nonexempt property and the distribution of the proceeds to its creditors. According to separate documents in the court filing, Flagstar engaged in a Mortgage Warehousing Loan and Security Agreement in November 2016, while both ICBCFS and Mirae made separate Master Repurchasing Agreements (MRAs) in April 2016 and March 2017, respectively.
After Live Well abruptly closed its doors in early May, both ICBCFS and Mirae accelerated the repayment dates for their MRAs, immediately making them due and payable. When Live Well allegedly exhibited an unwillingness to follow through on their obligations related to their MRAs, the companies filed suit in bankruptcy court to structure the liquidation of Live Well’s assets in the absence of the company cooperating.
“Based on the foregoing and other information publicly available to Flagstar, the other petitioning creditors and Live Well’s stakeholders, it appears beyond any conceivable or serious dispute that Live Well is insolvent and is not paying its debts as they become due,” Flagstar’s complaint reads. “This is evidenced by, among other things, Live Well’s failure to pay its debts to the Flagstar and the other petitioning creditors, its wind down of operations and the layoff of substantially all of its employees.”
In order to facilitate repayment in a more efficient way, forcing Live Well into bankruptcy has the chance to more correctly satisfy Live Well’s remaining financial obligations, the filing says.
“Flagstar submits that there is better alternative for the Debtor’s creditors and estate than the coordinated, controlled, court-supervised liquidation that can be accomplished only through a bankruptcy proceeding,” the filing reads.
Because of the company’s recent mass layoff, Flagstar says that there are “serious questions” regarding Live Well’s management and control, along with its ability to protect and preserve its assets. This is why Flagstar and the other Live Well creditors are seeking to compel bankruptcy, the filing says.
“Flagstar and the petitioning creditors have filed the Involuntary Petitions in order to initiate a court-supervised, orderly liquidation process that will preserve the debtor’s assets, protect value and, ultimately, provide for the distribution of such assets and value to parties entitled to them,” the filing concludes.
In an additional filing, the counsel for Live Well’s creditors add that the companies have each been separately contacted by the SEC and the FBI, which are conducting investigations into Live Well’s financial activities. These investigations also focus on Live Well’s former CEO, the filings state.
“The Petitioning Creditors are not the only entities concerned about Live Well’s past and current practices,” says attorney Adam G. Landis in the separate filing. “Each of the Petitioning Creditors has been contacted by one or both of the SEC and the FBI regarding Live Well and Mr. Hild, and each is cooperating in those entities’ investigations, including by producing requested documents.”
Further making the case for the appointment of an independent trustee to oversee the Chapter 7 involuntary bankruptcy and liquidation, the counsel for the creditors say that intervention by the bankruptcy court is important in order to compel what remains of the company to cooperate.
“In addition, upon information and belief, Live Well, at Mr. Hild’s direction, has taken numerous actions that have served to protect and promote Mr. Hild’s personal interests to the detriment of Live Well and its creditors,” the filing reads. “Mr. Hild can be expected to continue to do so absent this Court’s immediate intervention.”
In a late filing Monday, counsel for Live Well Financial responded to the Chapter 7 suit being brought by the creditors, citing precedent and saying that the appointment of an independent trustee would be detrimental for Live Well in meeting its outstanding financial obligations.
“As the Court and all parties to the Involuntary Bankruptcy Case are aware, the appointment of an interim trustee can disrupt the alleged debtor’s financial life, and leave a company ‘scarred and crippled beyond any real chance for recovery,” even where “[a} debtor was victorious in resisting the involuntary petition,” Live Well’s counsel writes, citing a previous case.
The company’s legal counsel also say that while there may have been mistakes made in delaying communication with creditors, that does not necessarily mean that anything illegal took place.
“Certainly prior to the Filing Date, Live Well could have been more forthcoming in its ‘dealing with the Petitioning Creditors,’” the company’s counsel writes. “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.”
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.
Flagstar Bank had previously filed a lawsuit against Live Well, seeking repayment of more than $80 million in delinquent loans and interest, according to a court filing made with the U.S. District Court for the Eastern District of Michigan.
Multichannel lender Open Mortgage also recently announced 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.
Along Fifth Avenue in Havana, the old stately homes are now embassies. These days they stand out not only because of their flags and seals, but because of the throngs of visa applicants desperately trying to find a way out of Cuba. The biggest crowds used to form in front of the American embassy, but not since the United States suspended visa processing after diplomats suffered unexplained health ailments. The economic difficulties of Venezuela have greatly reduced the supply of discounted crude oil shipments to Cuba and all but eliminated lucrative business deals. The impact is seen in the shortage of fuel and food, even for those residents who hold convertible pesos, the Cuban currency substitute for the dollar.
The United States has also restricted American visitors and banned cruise ship stops on the island, greatly reducing another major source of foreign exchange. Cubans are recalling the infamous “special period” after the collapse of the Soviet Union when the cutoff in Soviet aid caused a severe contraction in the Cuban economy. Visitors perceive a rising concern about the future, an impatience with economic stress, and an inflexible communist bureaucracy. Many Cubans, especially the young, believe that the only way to improve their lives is to emigrate away from the island.
Today, there is a steady trickle of Cubans who are traveling to Venezuela, Colombia, Ecuador, and Peru, joining larger streams in Central America and Mexico, making their way to the southern border. After Hondurans, Guatemalans, and El Salvadorans, Cubans form the next largest group of those seeking asylum in the United States. Cuba has a long tradition of using emigration as a steam valve for popular discontent. After the Cuban Revolution in the 1950s, the Freedom Flights brought tens of thousands of refugees unhappy with Fidel Castro and his imposition of communism. In 1980, tensions over an incident involving Cubans seeking refuge in the Peruvian embassy led Castro to announce all Cubans were free to leave.
The result was the Mariel boatlift bringing 120,000 Cubans to the United States in a month. Internal tensions during the “special period” in the 1990s led to a Cuban rafter crisis that brought thousands more refugees to the Florida coast until the Coast Guard interdicted rafters at sea and detained them at the Guantanamo Bay Naval Base. The negotiations with Cuba led to the “wet foot dry foot” policy whereby Cuban rafters interdicted at sea were returned to the island while the few who survived and reached American shores were allowed to stay. The United States also agreed to accept 20,000 Cuban immigrants a year, a flow reduced since the American embassy has ceased visa processing.
The current social and economic strains within Cuba, combined with the ratcheting up of American economic sanctions on the island, are creating the conditions for a new mass exodus. The aging Communist Party First Secretary Raul Castro and the younger political cohort poised to assume power know from history that mass migration of Cubans to the United States not only eases domestic tension, but forces the United States to focus on Cuban concerns. This time, however, the rafters will more likely depart western Cuba for the Yucatan Peninsula in Mexico, rather the cross the Florida Straits directly to the United States. If Cuba refuses to accept them back, it would again set off a major exodus. These Cuban refugees would be waiting at the southern border within just days of their arrival.
The United States government could face a critical decision of how to respond if the number of Cuban refugees swell to tens of thousands. If history is any indication, this new wave of Cuban immigrants will also be accommodated in the United States. The Cuban Adjustment Act of 1966 allows Cubans to apply for lawful permanent residence after a year of physical presence in the United States. Unlike the Central Americans, these Cuban refugees will have a politically and economically powerful Cuban American community that has always welcomed them in the past.
John Caulfield is the former chief of the United States interests section in Havana. He is the founder of the Innovadores Foundation, an American nonprofit organization that supports technology entrepreneurs in Cuba
The Hill: Cuba faces the next migration crisis | TheHill.
The settlement comes with no admission of wrongdoing. The statement says the settlement consists of $25.5 million to make the government whole for losses and $7 million in interest, according to the statement from the mediator, former federal Judge Gerald Rosen.
“We have always been proud of our growing participation in the FHA program. Every day teachers, police officers, factory workers and so many others who are the backbone of our communities, utilize Quicken Loans for this very important loan program,” Quicken Loans CEO Jay Farner said in a written statement. “Now that this dispute is behind us, we look forward to cultivating and expanding our relationship with both FHA and HUD so we can increase Americans’ access to home financing and home ownership.”
“We fought this case and it’s been resolved in a manner that we believe is exactly what we said we would do,” Emerson said. “If you take a look at how this case started and the demands they made of us and the dollar amounts they wanted from the very beginning, this case continued to get smaller and smaller each time we looked at it.”
U.S. District Court Judge Mark Goldsmith dismissed the federal government’s lawsuit against Quicken Loans on Friday, according to court records. In April, Goldsmith ordered the two sides into mediation talks led by Rosen, a retired chief judge of the Eastern District of Michigan.
Quicken Loans will continue to participate in the FHA lending program, according to the statement. “FHA relies on its partnerships with lenders, such as Quicken Loans, to advance home buying opportunities for Americans, and we look forward to continuing our relationship with Quicken Loans,” said Amy Thompson, HUD’s Assistant Secretary for Public Affairs.
The lawsuit had long been on the mind of Quicken Loans founder and chairman Dan Gilbert, who started the company in 1985 and is now worth more than $7 billion, according to Forbes.
Gilbert was highly critical of the DOJ in a 2015 interview with the Detroit Free Press.
“This is what happens when you dare to stand up for justice and the truth to the Department of Justice,” he told the newspaper. “This was an attempt to embarrass us and continue to pressure us to write enormous size checks to settle (allegations) to make them go away, and to admit things that did not occur.
“They’re talking about an investigation that ran for three full years, 85,000 documents subpoenaed … and this is what they come up with — a few anecdotes and a few fragments of chains of emails taken out of context,” Gilbert said four years ago.
In addition, the mortgage lender has more quietly stewing behind the scenes. In April 2015, a Quicken Loans web administrative address was used to register no fewer than 25 web domains aimed at the DOJ.
They are domain names including DepartmentOfJusticesBullies.com, Department OfJusticeShakedown.com, DOJBullies.com and DOJShakedown.com, among others. At one point in the last couple years, Gilbert has had “bureauclowns” written on a board in a 10th floor Quicken Loans office.
Michele McCoy always thought she and her siblings would inherit the house she grew up in on Decatur Street on Detroit’s west side.
Her father, a Detroit Police officer, and her mother, a schoolteacher, bought the three-bedroom bungalow in the late 1960s after moving here from Wheeling, West Virginia.
“It would be part of our family legacy because that was the first property my family bought when they moved to Michigan,” McCoy, 55, said.
But that changed after a visit nearly 20 years ago from a door-to-door representative of a reverse mortgage lender.
The house on Decatur now is one of 1,884 reverse mortgage foreclosures in Detroit between 2013 and 2017. No other city in the country has seen more in that span, according to a USA Today analysis of 1.3 million loan records and hundreds of foreclosure cases. The Free Press and USA Today reporters reviewed data and conducted interviews in recent weeks to try and understand why Detroit and other urban communities have borne the brunt of the reverse mortgage foreclosure trend.
Reverse mortgages work like this: Lenders appraise the value of a house and allow homeowners to borrow back money against that market value.
Borrowers can stop making monthly mortgage payments, and they can stay put for life, so long as they maintain the home and pay property taxes and insurance. For years, reverse mortgages required no credit check and government-mandated financial counseling can be as easy as a 20-minute phone call.
At the end — a move-out, death or default — the bank calls the loan due, to be paid back either by the sale of the home or an heir or homeowner repaying the loan money. Lenders and their investors make their money through origination fees that can top $15,000 with fees and mortgage insurance, and by charging interest on the loan balance.
Reverse mortgage lenders targeted Detroit and other large urban areas over the last couple decades, sometimes with misleading sales tactics.
Nearly 100,000 of the loans designed for seniors to generate some cash have now failed nationwide, leaving those elderly borrowers to navigate the often-unforgiving foreclosure process
McCoy’s parents, William and Virginia Creighton, took out an $84,000 reverse mortgage in 2000 on the home for repairs. The house needed a roof, pipe work in the basement and a furnace, McCoy said.
The Creightons fell behind on their property taxes and lost the house to foreclosure in 2016. Fannie Mae sold the property the next year to Paramount Consortium, a Warren-based company, for $4,500 — an amount so paltry that McCoy said she wouldn’t share with her parents.
They are now both in their 90s and live in an apartment in Westland. Looking back, McCoy said she doesn’t think her father fully understood the reverse mortgage.
“He was just confused,” she said.
Detroit edged out Chicago — with a population quadruple Detroit’s — to lead the nation in reverse mortgage foreclosures from 2013 to 2017.
What’s more, Detroit has three of the top 10 ZIP codes in the United States for reverse mortgage foreclosure in the last five years. Those ZIP codes are 48221, which includes the University District, and two others nearby, 48235 and 48227.
Detroit was ripe for reverse mortgage lenders in the past couple decades because of its high senior population and the high number of homeowners with equity built into their homes. Even if the city’s homes were declining in value, Detroit was attractive for lenders who could rake in closing costs and other fees.
For low-income seniors who needed help with living expenses or home repairs, a reverse mortgage seemed like an attractive option to secure a new cash flow. Borrowers must be at least 62 years old to qualify for a reverse mortgage.
“You have a large population of homeowners with equity built into their homes,” said Joshua Akers, an assistant professor of geography and urban regional studies at the University of Michigan-Dearborn. “You have a large senior population that is also looking for additional income.”
Seniors who take out a reverse mortgage are still responsible for their property taxes and home insurance, and a missed payment can trigger a foreclosure. Loans also come due for surviving family members after the death of the borrower. If the family does not cover the loan balance, the lender can foreclose on the property.
The effects of reverse mortgage foreclosures are particularly devastating for seniors. Many are out of the job market, making it more difficult to rebound from losing their home.
“For many Americans, the home is their greatest asset. They’re putting it on the line,” Akers said. “For a lot of these seniors, losing their home is the last thing they had.”
Detroit’s place at the top is emblematic of a national pattern.
Reverse mortgages end in foreclosure six times more often in predominantly black neighborhoods than in neighborhoods that are 80% white.
Even comparing only poorer areas, black neighborhoods fare worse. In ZIP codes where most residents make less than $40,000, the analysis found reverse mortgage foreclosure rates were six times higher in black neighborhoods than in white ones.
Chicago was second in USA Today’s analysis of reverse mortgage foreclosures with 1,846 from 2013 to 2017. Baltimore had 1,516; Miami 1,329; and Philadelphia had 1,027 to round out the nation’s top five.
One Reverse Mortgage, part of the Detroit-based Quicken Loans family of companies, is an industry leader. It made $788 million worth of government-backed reverse mortgages in 2018, the second-highest behind American Advisors Group, which issued $2.7 billion in loans, according to Inside Mortgage Finance, a company that tracks mortgage statistics.
Gregg Smith, CEO of One Reverse Mortgage, said home equity should be factored into seniors’ financial plans. “It empowers the senior to utilize the equity in their home in a way they deem to fit their needs,” he said.
Most of One Reverse Mortgage’s loans, by volume, are in California, Florida and Texas — places with high populations and home values, Smith said. The company was not very active in Detroit from 2001 to 2009. It only originated 17 loans in that time, according to USA Today’s data.
Before finalizing a loan with One Reverse Mortgage, seniors undergo a financial assessment and counseling session where obligations like property taxes and home insurance are explained, Smith said, adding that his company has been up front and clear with borrowers throughout its existence, which dates to 2001.
“From our perspective, I think we do an amazing job with every client and putting them in a position to succeed,” he said.
Mary Jo Homrich, 80, said the reverse mortgage she took out from AAG four years ago on her home in Portage has worked out well.
“I have money I can draw from it if I needed,” Homrich said. “I’m glad that money’s available because I’ve had to have a couple things done to the house.”
Her home was worth about $120,000 and she used the reverse mortgage to pay off a $40,000 debt and obtain a $20,000 line of credit that can be used when she needs it. Homrich, a retired bookkeeper, said she has talked with her children about the loan and makes sure to stay up to date on her property taxes and insurance.
“I’m hoping I can stay here for another 10, 15 years. I plan on staying around,” she said. “It was a good deal for me.”
But in Detroit, housing advocates and legal aid lawyers have seen families suffer as a result of reverse mortgages.
In the mid-2000s, risks of foreclosure often were not clear. Some advertisements for reverse mortgages even claimed that borrowers would not have to make any payments, said Joe McGuire, a staff attorney in Detroit for Michigan Legal Services.
“There was an era, especially during the mortgage boom, where there was pretty unscrupulous pushing of these,” McGuire said.
McGuire said he mainly sees two types of eviction cases stemming from reverse mortgages.
The first type of case involves a borrower who is alive but fell behind on property tax or insurance payments. Those payments previously may have been escrowed into the original mortgage bill. “It’s a big change for a lot of people to go from that to having to pay the property taxes and the insurance themselves,” he said.
The second common instance involves children who lived in the home of a deceased borrower. The house is foreclosed on to satisfy the loan, leaving the senior’s child to go from thinking they were going to inherit the house to getting evicted.
“It’s very disruptive to people,” McGuire said. “With working-class people of color, most of the generational wealth is in the home and that home being passed on.”
Typically, there is an opportunity for families to redeem homes lost to reverse mortgage foreclosure at a sheriff’s sale. The price is based on an appraisal by the federal government and may be less than the loan balance, said Kim Stroud, director of mortgage foreclosure prevention and land contract support for the United Community Housing Coalition in Detroit.
Stroud said UCHC has small loan program that can help with those redemption costs.
Seniors considering a reverse mortgage should make sure to get counseling from an agency certified by the U.S. Department of Housing and Urban Development, said Dannielle Laura, interim director of economic opportunity services for the Wayne Metro Community Action Agency.
“It’s easy to think (a reverse mortgage) can be the answer to your prayers,” Laura said. “My advice would be that a little healthy skepticism never hurt anyone.”
Millions have watched Chernobyl, the TV series about the 1986 nuclear meltdown, and your coverage has been extensive (Report, 13 June). But an important related story has not had a mention at this time of renewed interest. Following the catastrophe, the tiny island of Cuba stepped forward and cared for over 20,000 young cancer victims from 1989 to 2011, – medical care, schooling, clothing, food, accommodation, playgrounds – all free of charge. A specialised medical facility was opened to the east of Havana, and Cuban doctors travelled to the affected region to treat patients in their homeland.
No other country in the world launched such a massive programme. The Cubans responded – as “an ethical and moral”, not a political question, as it was put at the time, and the programme continued despite changing governments in the Ukraine.
Today, the aftermath persists. Just a few weeks ago, Cuba announced that it will resume the programme in a new facility for the sons and daughters of the victims, who are now showing ailments similar to those of their parents. The tightening of the blockade against Cuba (Cuba forced into rationing as US sanctions and Venezuela crisis bite, 11 May) affects not only the Cuban people, but also the thousands of patients being cared for by Cuba’s renowned international medical teams. Surely worth a mention on several counts?
Dr Doreen Weppler-Grogan