ALEXANDRIA, Va. – As part of the resolution of Norlarco CU, NCUA is expected to buy back as much as $170 million in Florida real estate loans the failed credit union sold to 16 credit unions and two banks as loan participations.
The deal would resolve pending litigation brought by one credit union purchaser of Norlarco loans and buffer those credit unions that otherwise would have to charge off millions of dollars in loans, a source familiar with the situation told The Credit Union Journal.
The deal would also allow NCUA to create larger packages of the $440 million or so of Florida loans it is assuming from three failures–Norlarco, Huron River Area CU and New Horizons Community CU–making them more marketable on the distressed loan market, the source said.
NCUA, which is poised to sell the remnants of Norlarco in a purchase and assumption agreement, declined to comment yesterday.
The Norlarco situation is one of several that have roiled the participation market over the past two years, with dozens of credit unions still sifting through hundreds of millions of participations sold through failed subprime auto lender Centrix Financial.
Under a purchase and assumption, a credit union will purchase the healthy assets of a failed credit union, such as its member accounts and branches, while NCUA assumes the failed assets, such as the Florida loans. Norlarco made about $240 million worth of loans in the south Florida communities of Cape Coral and Lehigh Acres, $170 million of which was sold off to the participating credit unions and banks.
The NCUA Board is scheduled to meet Dec. 13 to decide which of three Colorado credit unions will purchase Norlarco’s assets: Ent FCU, Bellco FCU or Public Service CU.
