MIAMI – Power Financial CU is appealing last month’s ruling by a federal court dismissing its suit against NCUA over a $15 million real estate loan deal gone bad, saying the federal court erred in rejecting the credit union’s claims over field of membership eligibility.
In dismissing the case, the U.S. District Court for the Southern District of Florida said NCUA was right in voiding the deal by Power Financial to buy mortgages held by Keys FCU, which has been under NCUA conservatorship since September 2009, because the borrowers were outside of Power Financial’s FOM.
NCUA has been trying to resolve Keys FCU since it took the one-time $210-million credit union under conservatorship in September 2009. One deal to acquire the credit union by Dade County FCU fell through.
Power Financial is based in Pembroke Pines, a suburb of Miami that is 160 miles north of Key West, the seat of Monroe County and home of Keys FCU.
To approve the deal, said the court, “would put NCUA in the proverbial position between a rock and a hard place,” requiring it to either void a legal contract or approve a deal that violates the Federal CU Act’s provisions on field of membership.
But Power Financial noted that state regulators subsequently approved its expansion to cover the Florida Keys and ruled the credit union could complete the deal because it was authorized to sign the borrowers as members. The state credit union statute “does not require that loans purchased by a credit union have been made to persons who are members of the purchasing credit unions at the time the loans were made, but only to persons who are or who would become members of the purchasing credit union at the time the loans are purchased.” Therefore, reasoned Power Financial, it could buy the loans, then sign the borrowers as members afterward.
The court said if Power Financial had done so “in a reasonable time frame” then NCUA would have been obligated to complete the deal by the July 15, 2010 closing date. It was not until October 2010 that the Florida Office of Financial Institutions approved Power Financial’s request to expand to Monroe County. “However,” said the court, “this authorization to enroll members in the Monroe County area by no means guaranteed their enrollment.”
“The court therefore refuses to impose any sanction for breach upon NCUA for failure to perform an obligation which the law will not allow,” the ruling said.
