NCUA Weighs Florida Land Mess

FORT MYERS, Fla. – Foreclosures in two real estate developments continued to soar last month, complicating the resolution of three failed credit unions, as well as dozens more that participated in loan pools related to the projects. Mortgage foreclosures surged 18% for August to 1,232 in Lee County, home to the Cape Coral and Lehigh Acres developments which have bankrupted the three credit unions–Norlarco CU, Huron River FCU and New Horizons Community FCU. NCUA, because it took over the three credit unions, is on the hook for as much as $500 million in loans the three made to investors in the two developments. NCUA also is monitoring more than $150 million in participations owned by as many as 30 credit unions. NCUA officials declined to say how the mounting losses may impact the National CU Share Insurance Fund. "We believe it’s too early to speculate, but we are watching the situation closely," said John McKechnie, spokesman for the agency. NCUA is said to be considering a package sale of the distressed loans, but the market for distressed real estate loans is the worst for sellers in many years because of the meltdown in the subprime mortgage market. Observers believe the unwinding participation deals hold potential for greater losses for Norlarco. William Sterner, president of Elevations CU in Boulder, Colo., said his credit union considered merging in 2005 with Norlarco, based in nearby Ft. Collins, Colo., but backed off after realizing the exposure Norlarco had in the Florida developments. At that time, more than 30 credit unions and two regional banks had bought participations in pools of Norlarco construction loans in Florida. "It was fairly extensive," Sterner told the Credit Union Journal yesterday. One of those credit unions, Superior Choice CU in Wisconsin, has filed suit in federal court to recover a $12.1 million participation it purchased from Norlarco. Both Huron River Area and New Horizons Community are believed to have sold participations in the Florida loan pools to other credit unions, also.