FORT COLLINS, Colo. -
With some of those credit unions holding multi-million dollar participations, a default on the loans could push the credit unions over the brink during one of the most difficult times in credit union history.
David Maus, president of Public Service CU, confirmed Friday NCUA has agreed to assume around $200 million in real estate construction loans Norlarco made in south Florida as part of his credit union’s agreement to purchase the healthy assets of Norlarco, namely a headquarters, six branches and 42,000 member accounts. But he would not say what NCUA plans to do with the loan participations sold to other credit unions.
An NCUA spokesman last week said the agency has made no decisions on what to do with the participations and is concerned about the market for the Florida loans in a declining real estate market.
The question NCUA is faced with is: should it assume all of the Norlarco loan participations and try to sell them on the distressed loan market in large bundles, or face the prospect of having the participating credit unions charge-off the loans, potentially pushing causing some of them to fail.
The Norlarco participation took place in two bundles. The first consists of $170 million in real estate construction loans made in the Florida developments of Cape Coral and Lehigh Acres. Sixteen credit unions and two banks are believed to have bought these participations. At least one of those credit unions, Superior Community CU, in Wisconsin, which holds a $16-million participation, reported a $2.4 million loss for 2007.
The second bundle consists of subprime auto loans Norlarco sold to other credit unions. At least one credit union holds more than $1 million worth of these loans.
Maus said he believes the subprime auto loans participations do not represent a large amount.
Norlarco is one of three failed credit unions that made loans in the Florida developments, leaving NCUA, which has sold off the healthy assets of all three, holding more than $300 million in bad loans in those developments.
