The National Credit Union Administration said Friday that it has begun negotiations with three Colorado credit unions to buy the healthy assets of Norlarco Credit Union of Fort Collins, which failed because of loans made to far-flung real estate developments in southwest Florida.
The decision to abandon a five-month effort to run the credit union under conservatorship and to assume $240 million of Florida loans made by the $340 million-asset Norlarco indicates the regulator may also be ready to assume as much as $260 million of loans made in the same developments by two other failed credit unions: Huron River Area Federal Credit Union in Michigan and New Horizons Community Credit Union in Colorado.
The rapidly falling value of the $500 million of real estate loans will make it tougher for the NCUA to pay a dividend on the National Credit Union Share Insurance Fund next year, or in subsequent years. NCUA officials would not discuss the specifics of the proposed Norlarco sale, in which another Colorado credit union would purchase the healthy assets and the NCUA would assume the bad ones, including the Florida loans.
"We've come to the conclusion that this was the best way to resolve this case," said John McKechnie, a spokesman for the regulator.
In a letter sent to members last week, the NCUA said the six Norlarco branches would continue to operate through the sale process, which they hope to complete in December. Since it was disclosed in July that regulators had taken Norlarco over in May, members have withdrawn $52 million of deposits, or about 17% of the credit union's total.
Norlarco and the other two credit unions were involved in a real estate speculation system, known as Millionaire University, in the Florida communities of Cape Coral and Lehigh Acres. Students enrolled in the get-rich real estate investment plan were sold homes that would be constructed with guaranteed returns of 14% a year before being flipped in the then-overheated Florida market.
The market's considerable cooling led thousands of the borrowers to default on their loans.
