Central States Mortgage Co., a Wauwatosa, Wis., provider of origination services to more than 250 credit unions, shut its doors Monday.
The closing was the second in as many months at a major credit union-related mortgage firm. U.S. Mortgage Corp. of Pine Brook, N.J., and its CU National Mortgage filed for bankruptcy protection last month.
Central States is owned by 25 credit unions and the Wisconsin Credit Union League.
Last year its residential loan originations dropped 31%, to $538 million.
The lender has been embroiled in controversy over the past eight months — first with the firing of Richard Jungen, its chief executive and founder, and then with a suit claiming he defrauded it of $15 million through a secondary funding vehicle he owned, Interim Funding. (According to the suit, the fraud took place while he was still managing Central States.)
Members United Corporate Federal Credit Union of Warrenville, Ill., which provided a warehouse line of credit to Central States, said it is preparing to write off millions of loans to the company.
