FORT COLLINS, Calif. -
Norlarco Credit Union, which is currently under NCUA conservatorship due to a huge failure of loans in West Florida, reported members continued to withdraw their funds at alarming rates last month.
Meanwhile, Miramar, Fla.-based Eastern Financial FCU has filed to foreclose on a $30-million loan it made to a now-troubled condominium project. The developer, well-known Merco Group Inc. of Miami, has failed to make payments on the loan since June, according to documents filed in Palm Beach County Circuit Court. The developer has failed to break ground on the 338-unit condo development overlooking Florida's Intercoastal Waterway due to inadequate preconstruction sales. The condos were supposed to sell for amounts ranging from $350,000 to $4 million each. The $2-billion CU has asked that the court declare the lender in default and order full payment of the loan.
The Miami developer bought the land in March 2004 for $23.4 million, and Eastern Financial refinanced the loan and lent the developer an additional $6.6 million, according to court documents. The credit union is asking the court to approve the sale of the property to satisfy the loan.
Meantime, Norlarco reported it lost another $20 million in deposits in September, following $32 million of withdrawals in August-soon after NCUA takeover of the CU was made public. State regulators had taken the CU under conservatorship in May, but kept it secret until July 24, when NCUA confirmed the takeover. Since then, Norlarco has lost more than 17% of its deposits, and was down to $249 million in deposits as of Sept. 30.
A number of big-name home lenders are being targeted in a new suit brought by borrowers in the same failed land speculation scheme that hit Norlarco, Huron Area and New Horizons. The new suit, filed in U.S. District Court for the Middle District of Florida, alleges a Pennsylvania couple was able to borrow $1.3 million to buy six new homes with a down payment of just $9,000.
In their suit, James and Marianna Cliggett, of Warrington, Pa., say the scheme was facilitated by home loans provided by Countrywide Bank, Aurora Loan Services, the residential Alt-A lender owned by Lehman Brothers, and Homecomings Financial LLC, a unit of GMAC, as well as Norlarco CU. The suit claims the national lenders participated in a massive fraud to induce middle-income investors to finance construction of pre-leased homes by requiring very small down payments, guaranteeing 14% annual returns and offering to buy back the loans.
