CMG Not Liable for Losses Tied to Failed LoriMac

SAN FRANCISCO - A federal court has dismissed a suit by 13 credit unions against CUNA Mutual Group, which claimed the bond issued by the credit union insurer should have covered the more than $4 million they lost when a mortgage company they lent through, LoriMac, went bankrupt last year.

The credit unions alleged that the San Francisco-based company was supposed to be servicing their loans and repatriating the payments to them, but instead misappropriated the funds, thereby making the credit union insurer liable for the fraud coverage on their bonds.

LoriMac filed for Chapter 7 Bankruptcy in February 2007. But the U.S. District Court for the Northern District of California ruled it lacked jurisdiction over the claims, which it said should be brought in state court.

The same credit unions, which include Cessna Employees CU, Advantage Plus FCU, East Idaho CU, Health Services CU, Idaho Falls Teachers CU, Les Bois FCU, Clearwater CU, Scenic Falls FCU, Simcoe CU, St. Alphonsus Medical CU, Pocatello Railroad FCU, Racom Community CU and Transit Employees FCU, have also brought suit against LoriMac and its owners. At least two other suits have been filed by CUs against the defunct mortgage company. (c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved. http://www.cujournal.com http://www.sourcemedia.com