SUPERIOR, Wis.–Superior Choice Credit Union has filed a lawsuit against NCUA over the payout it received as part of the collapse of Norlarco Credit Union in 2006.
Norlarco lost tens of millions of dollars on bad mortgages along Florida’s Gulf Coast earlier in the decade, and had participated many of those loans out to other credit unions, including Superior Choice. In its suit against NCUA, Superior Choice an additional $10.2 million funds it says it was owed by then Ft. Collins, Colo.-based Norlarco, in part because the credit union was deceived about the nature of the contract Norlarco had with a Florida home builder.
In its filing with the U.S. District Court in Colorado, SCCU said the agency pait it approximately $700,000 as part of an agreement with K. Hovnanian Homes, which had acquired First Home Builders, the company with which Norlarco initially set up shop (CU Journal, Feb. 23).
In its suit, and as reported earlier this year by Credit Union Journal, Superior Choice said it was not made aware that Norlarco and First Home Builders had in 2005 modified their agreement in which First Home Builders was to guarantee to make payments on construction loans for each home until permanent financing had closed. Many of the homes, built in Cape Coral and Lehigh Acres, Florida, were contracted for by speculators who ended up walking away from the deals when the once sizzling Gulf Coast market started cooling.
The modification left the participating credit unions holding the debt, with Superior Choice saying in its filing it could have as much as $10 million in bad loans as a result. The credit union stated in its filing it would not have purchased two participations had it also known that the Norlarco/First American Mortgage loans had been “classified” by Colorado’s Commissioner of Financial Services.
Norlarco’s troubled assets, including most of the homes in Florida, were assumed by NCUA as part of a merger agreement with Denver’s Public Service Credit Union. The Coloradan first reported the news of the lawsuit.
