Florida Real Estate Speculation Claims Two CUs

FORT MYERS, Fla. – NCUA is still tallying hundreds of millions of dollars in losses accrued by two credit unions–one in Michigan, one in Colorado–the federal regulator took over earlier this year. The loan losses came after thousands of homebuyers walked away from failed real estate developments near Florida’s Gulf Coast–thousands of miles from the credit unions’ home offices. NCUA is trying to sell the two credit unions, Huron River Area FCU of Ann Arbor, Mich., and Norlarco CU of Fort Collins, Colo., both of which are buried by real estate construction loans in Cape Coral and Lehigh Acres. Norlarco, Colorado’s eighth-largest credit union with almost $400 million in assets, has seen its real estate charge-offs rise ten-fold this year to almost $60 million, with similar mortgage losses accruing at Huron River. The two credit unions were among a handful of lenders that provided mortgages to speculative investors far afield–in Philadelphia, Miami and Georgia–who ended up defaulting on the loans when the value of the property plummeted over the past two years, according to several lawsuits filed in the case. It’s not clear how the speculators qualified for membership in the Michigan and Colorado credit unions. So far, at least 29 suits have been filed in Lee County Superior Court and a class action suit was filed in federal court. For Huron River Area, most of the loans were acquired from an originator called Commercial Loan Inc. The two real estate developments, which once held promise while property values boomed here, have become ghost towns as investors in the properties have walked away from the loans by the thousands, according to one local observer. "There’s huge numbers of houses just vacant," said the observer. The Michigan credit union, which made thousands of loans for the properties amounting to more than $200 million, was taken over by NCUA in February because of the weight of the losses. Norlarco was also taken over by NCUA in May.