FT. MYERS, Fla. -
Representatives from NCUA are currently in talks with the builder of the Florida homes, which partnered with the three credit unions, and other parties over tens of millions of claims in real estate developments in Cape Coral and Lehigh Acres.
The two sides are scheduled to meet in mediation Friday to negotiate some kind of settlement of claims. No resolution of the claims is guaranteed, the sources emphasized.
Lawyers for both sides refused to comment on the talks.
The three credit unions, Norlarco CU and New Horizons Community FCU, both in Colorado, and Huron River Area FCU, in Michigan, financed thousands of loans for new homes in the two developments that were meant to be 'flipped' after a year at a guaranteed 14% return for investors. Thousands of the loans have gone into default, leaving NCUA, as conservator of the three failed credit unions, holding as much as $500 million in loans in the two projects.
An untold number of credit unions, at least two dozen, also hold millions of dollars in loan participations in the two projects. NCUA is hoping to stave off investors and angry credit unions in court if it can negotiate a settlement of claims.
NCUA representatives said last week they are watching the Florida case unfold very carefully and are confident the National CU Share Insurance Fund has adequate resources to handle the liability. One top NCUA official noted the NCUSIF now has more than $7 billion in assets.
The spreading scandal has attracted the attention of members of Congress, as several who spoke at NAFCU's Congressional Caucus last week said they have been apprised of the situation. Paul Kanjorski, the Pennsylvania Democrat who has become credit union's biggest friend in Congress, said he believed the actions of the three credit unions, far from their home fields of membership, were unusual and did not represent a widespread practice.
The banking lobby has begun using the Florida mess to help build opposition in Congress to CURIA and the provision to expand business lending for credit unions. "The unfolding situation, where tax-exempt credit unions around the nation invested in a Florida real estate scheme called "Millionaire University" is a wake-up call on an industry lobbying heavily to further expand their commercial lending powers," said Camden Fine, president of the Independent Community Bankers Association of America, which is lobbying against CURIA. "Many credit unions were involved in this out-of-state commercial loan scheme that was far removed from serving their common bond membership and that eventually may cost the National Credit Union Share Insurance Fund millions of dollars in losses."
A spokesman for the American Bankers Association echoed his criticism. "Policymakers should view the developments in Florida like the flashing yellow lights at a railroad crossing. If you proceed, there is danger ahead. If you stay put, you are safe," said Keith Leggett, senior economist at the ABA, referring to a provision in CURIA which would raise the current cap on member business loans for CUs.
Credit union representatives cautioned against judging the entire credit union movement on the activities of the three failed credit unions. "In his statement, Camden Fine attempts to tar an entire industry for the unfortunate circumstances of just three credit union," said Fred Becker, president of NAFCU. "Based on the news accounts we've seen, if established in fact, we cannot condone this loan activity, either, and we look forward to a thorough investigation by the state regulators."
