NEWARK, N.J. – Credit union customers of CU National Mortgage will ask a federal bankruptcy judge this morning to block the company’s use of millions of dollars of their funds while it navigates the bankruptcy procedure.
The move comes as dozens of credit unions are worrying that the company has failed to pay property taxes, insurance and other escrow payments on member loans it had contracted to do under servicing agreements with the credit unions.
The credit unions represented in court include: Suffolk FCU, Treasury Department FCU, Novartis FCU, Educational Systems FCU, County Educators FCU, Energy FCU, Rutgers FCU, Piedmont Aviation CU, Pinnacle FCU, Lassen County FCU, British Airways Employees FCU, Diablo Valley FCU, ADP FCU, United Financial Services FCU, Delaware First FCU, Jersey Trades FCU and Frontier Financial FCU.
Lawyers for Picatinny FCU were negotiating separately Friday on a deal that would compel the company, a unit of U.S. Mortgage Corp., to turn over paperwork related to more than $14 million in mortgages the company allegedly sold to Fannie Mae without the Dover, N.J., credit union’s authorization. "I can’t talk about the details, yet," James Forte, a lawyer representing the $220 million institution, told The Credit Union Journal. "We’re hoping to have an agreement."
Picatinny is also seeking an order from the bankruptcy court compelling Fannie Mae to return its mortgages and all of the paperwork that they believe was illegally transferred from CU National.
Lawyers for a broader group of credit unions will argue in court this morning against CU National’s bid for debtor-in-possession financing that would allow the company to continue using its existing resources and bank accounts–funds they believe belong to them. "The Debtor has taken the position that member payments are fungible and may be used to pay any expense that the Debtor is authorized to incur in this case," said the credit union lawyers in documents filed with the court Friday. "Accordingly, immediate safeguards must be established to protect and preserve the interests of the Credit Unions and their members, and any cash management system approved by the Court must comport with such safeguards.
The credit unions also claim that CU National sold millions of dollars of their loans to Fannie Mae either without authorization or without remitting the proceeds to them.
Lawyers for the group did not return phone calls last week.
