TAYLOR, Mich. – First Catholic FCU has filed suit in federal court to terminate a mortgage servicing contract with CUSO Mortgage, which it claims has violated its servicing contract with the credit union by, among other things, failing to file Form 1098s with the Internal Revenue Service for its borrowers.
"That’s only one of the allegations," Charles Holzman, a Southfield, Mich., attorney for Holzman Ritter & Corkery, which is representing the credit union in the suit, said yesterday. He said they are hoping to resolve the dispute with a minimum of public attention.
In its suit, the $146 million credit union claims it should not have to pay 2% (of outstanding principal balance) termination fee for the servicing contract because of the company, a wholly owned subsidiary of Wescom Central CU in Pasadena, Calif., failed to live up to the contract. The 2% termination fee is currently being held in an escrow account.
The suit claims that CUSO Mortgage, which provides servicing for as many as 100 credit unions, has failed to pay delinquent taxes for previous tax years; has filed to properly enter some mortgage modifications; failed to timely post payments; failed to monitor the existence of hazard insurance; and failed to file IRS Forms 1098 for all serviced loans for 2007, and failed to provide proof of filing Form 1098s for 2008, thereby breaching its duties under the servicing contract.
As a result of these problems, First Catholic claims its employees have had to perform many of these duties themselves. It is asking the court to release the 2% payment, and to order the transfer of the mortgages to a new servicer hired by the credit union.
Representatives of both CUSO Mortgage and Wescom Central declined to comment yesterday.
