FEDERAL WAY, Wash. -
The company, a subsidiary of the Washington CU League, has already obtained commitments of around $5 million in performing and non-performing Centrix loans from four credit unions and expects others of the hundreds of credit unions still holding Centrix loans on their books to participate, according to Phillip Slater, program manager for Ascend United.
"There are a lot of credit unions out there who were involved in the Centrix implosion and there were a lot of losses along the way," Slater said. "So a sale of the Centrix accounts seemed like a natural fit for us."
Centrix, which brokered more than $4 billion of subprime auto loans for as many as 300 CUs since 1998, filed for bankruptcy last September. Since then, credit union losses on the loans have mounted to the millions-at one point reaching a 38% charge-off ratio-and Centrix has become the target of fraud charges by its insurers, who claim it was a massive Ponzi scheme. At least one credit union, Denver's New Horizons Community FCU, failed due mainly to its Centrix exposure.
The Ascend United initiative comes as dozens of credit union participations in Centrix loan pools are unraveling. Recently, the Credit Union of Texas, one of the biggest Centrix participants, agreed to buy back $13 million of participated loans from Mission FCU. Dozens of other credit unions are also negotiating buybacks of participations pools.
Plans call for Ascend United to aggregate Centrix loans into pools, then sell the pools to qualified buyers. The 5-year-old company has engineered the sale of several other credit union loans. Most of those sales, however, only recovered pennies on the dollar for the selling credit unions. The average return is just 3.5 cents to 5.5 cents on the dollar, depending on what's in the portfolio, according to Slater.
Ascend United is forming two pools of portfolios for Centrix loans. One will be made up of performing loans, accounts that are making fairly regular payments. The other will consist of non-performing loans, accounts that are past due.
The company will use a multiple bid process to get the best possible price. Many CUs are working to sell Centrix loans with non bids, which could hold down prices, the company noted.
Plans for the Centrix sale have been in the works for the last three months, according to Slater, who said they have received expressions of interest form credit unions all over the country.
Interested CUs are being asked to submit their filed to Ascend United by July 31.
