Troubled New York CU Cited By NCUA For Loan Participations

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GARDEN CITY PARK, N.Y. – NCUA said today it issued a supervisory order directing Sperry Associates FCU here, one of the biggest victims in the $140 million U.S. Mortgage/CU National Mortgage swindle and a major investor in loan participation pools, to boost capital and take other steps to return it to financial health.

The Letter of Understanding and Agreement signed with NCUA may reverberate even further because it will require the $360 million credit union to charge-off $1.3 million of non-performing participations it had with loans originated by the failed Cal State 9 CU; and another $1.9 million of a participation in troubled south Florida loans. The supervisory order could spell trouble for hundreds of other credit unions that hold participation shares in troubled real estate loans around the country.

Sperry Associates, which is fighting Fannie Mae for the return of $9.5 million of its mortgages fraudulently sold to Fannie by CU National, was cited for declining capital, participation lending losses, potential unrecognized investment losses and inadequate testing of high risk areas. In return for agreeing to the Letter of Understanding and Agreement NCUA will refrain from issuing an administrative order against the credit union.

The credit union, which lost $5.8 million in 2009, reported a net of $582,000 for the first quarter of 2010, but that net worth had slipped to 5.17% at the end of the quarter.

Sperry Associates is one of 28 credit unions that were victimized by the CU National fraud and is suing Fannie Mae for return of its mortgages.

A credit union official did not immediately return a phone call seeking comment.

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