CANTON, Ohio The Stark Metropolitan Housing Authority has filed a complaint in state court here seeking to evict SMHA FCU, after the tiny credit union it chartered in 2001 refused to start paying rent and other expenses the local agency was ordered by the U.S. Department of Housing and Urban Development to repay.
Efforts by the agency to recoup some of the subsidy it has promised the $2 million CU since its inception were prompted by a HUD audit last summer that determined the SMHA inappropriately used HUD money for a variety of purposes—including subsidizing the credit union--one of dozens sponsored by federal or local agencies--with the benefit of free space, non-member deposits or financial assistance. The audit found the housing agency mispent $8 million in HUD funds, $2.1 million of it to charter the credit union.
SMHA FCU, which serves 1,550 employees and residents of the housing agency, has filed a civil suit claiming the agency’s actions have threatened its existence and threatened ongoing merger talks. The CU is healthy, having reported a $46,000 loss for the first six months of the year, its first loss, but net worth of 22%.
Mark Wallach, an attorney with the Cleveland firm of Thacker Martinsek, who represents the credit union, said his client has a merger deal completed pending resolution of the litigation. "The bottom line is this needs to get resolved and it needs to get resolved fast," he told Credit Union Journal. "We've got a merger deal ready and we’ll continue to serve their residents and we’ll pay rent."
The housing agency chartered the credit union with a pledge of a $100,000 non-member deposit at 0% interest, a $50,000-a-year subsidy and annual rent of $1.
But all that changed after the HUD audit and the credit union claims in legal documents that the agency has ceased paying the subsidy and is in default of $100,000 owed by the agency.
“In further attempt to pressure the Credit Union into paying SMHA’s obligations for it, SMHA has threatened to unilaterally raise the Credit Union’s monthly rental to an unwarranted amount, and to move promptly to evict the Credit Union if it fails to pay that new rental, thereby putting the Credit Union out of business, even though SMHA has no other use for the facilities where the Credit Union is located,” according to the civil suit asking a federal court enforce the subsidy agreement.
The credit union asserts that the HUD allegations found no wrongdoing on the part of the credit union. “The HUD Audit does not give rise to any cognizable cause of action the Credit Union by SMHA, despite SMHA’s assertions to the contrary,” claims the civil suit.
Representatives for the housing authority or their lawyer also did not return phone calls.
A hearing on the housing agency's eviction bid is scheduled for Monday in Canton Municipal Court.
