FORT MYERS, Fla. - NCUA, which is about to become one of the largest landlords in southwest Florida, is competing against a rapidly deteriorating market in plotting one of the biggest real estate work-outs in the history of the credit union movement.
Homeowners, developers and lenders all are competing against one another to maximize property values as they race to sell off thousands of properties at ever-steepening discounts. K. Hovnanian Enterprises, one of the nation's biggest homebuilders that was involved with three failed credit unions here, has been selling off hundreds of properties at deep discounts during "Red Tag" sales, pushing down property values even more. "It's not just Hovnanian. It's all the builders across the board, who are trying to stay in business," Billy McFarland, a lawyer who is suing the lenders and homebuilders, told The Credit Union Journal.
NCUA is preparing to take on more than $440 million worth of real estate loans made in two Florida developments, giving the federal agency ownership of more than 2,000 homes in Cape Coral and Lehigh Acres. The move will allow NCUA to sell off the remaining assets of Norlarco CU, then Huron River Area FCU. The portfolio includes an estimated $238 million in loans originated by Norlarco-$170 million of which has been participated out to 16 credit unions and two banks, about $200 million originated by Huron River Area, and as much as $3 million by New Horizons Community CU, a Denver credit union that was sold off in June, according to sources familiar with the situation.
As conservator for Norlarco and Huron River Area, NCUA has been managing the Florida properties, which includes paying insurance and maintenance costs, such as having the grass mowed on a regular basis. After assuming the loans, NCUA will be faced with several difficult decisions as the decline in property values is expected to continue for the near term.
One decision will be whether to sell the loans and properties before they lose even more value, or to manage the portfolio until the local real estate market turns around.
