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News Now

CU System
CU CUSO in servicing dispute
TAYLOR, Mich. (1/22/10)--First Catholic FCU, based in Taylor, Mich., confirmed it has filed a suit in a federal court in Michigan seeking to terminate its mortgage servicing contract with CUSO Mortgage, a Pasadena, Calif.-based credit union service organization (CUSO). The $142 million asset credit union's complaint alleges the CUSO violated its service agreement with the credit union by, among other things, failing to file Form 1098s with the Internal Revenue Service for its borrowers. Charles Holzman with Holzman Ritter & Corkery in Southfield, Mich., the credit union's attorney in the case, said that is only one of the allegations. The credit union maintains it should not have to pay a 2% of outstanding principal balance termination fee on the contract because the company failed to live up to the contract. The fee is being held in an escrow account. "We're still trying to resolve the dispute," Angela Millis, CEO, told News Now. She confirmed the suit's claims, that CUSO Mortgage failed to:
* Pay delinquent taxes for previous tax years; * Properly enter some mortgage modifications; * Timely post payments; * Monitor the existence of hazard insurance; and * File IRS Forms 1098 for all serviced loans for 2007 and provide proof of filing From 1098s for 2008. These represent a breach of its duties under the servicing contract, the complaint says.
As a result, First Catholic FCU's employees performed the duties. It is asking the court to release the 2% payment and to order transfer of the mortgages to a new servicer hired by the credit union. The suit was filed in Michigan Eastern Federal District Court in Detroit on Dec. 23. Millis said the credit union is waiting for the CUSO to respond to the complaint. CUSO Mortgage is a wholly owned subsidiary of Wescom Central CU, Pasadena, Calif. It services as many as 100 credit unions.


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