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CU System
NCUA moves conservatorship loan suit to federal court
MIAMI (3/2/11)--The National Credit Union Administration (NCUA) has filed a notice to remove a $15 million breach of contract lawsuit filed by a Florida credit union to the U.S. District Court for the Southern District of Florida in Miami. The suit concerns an agreement to buy mortgage loans from a credit union now in conservatorship. Power Financial CU, Pembroke Pines, Fla., filed its complaint Feb. 14 in the 11th Circuit Court against Keys FCU, Key West, Fla. NCUA filed its notice of removal with the U.S. District Court on Thursday, saying that the agency, as conservator of Keys FCU, is the real party to the case. Keys was placed into conservatorship on Sept. 24, 2009, according to court documents. The case relates to a loan sale agreement that Power Financial and Keys Federal entered into on July 12, 2010, according to the original complaint filed in the 11th Circuit Court. The complaint said Power Financial agreed to purchase certain mortgage loans of Keys Federal and that the borrowers whose mortgage loans were to be purchased would automatically become members of Power Financial. On Aug. 27, 2010, Power Financial received a letter from Keys Federal that "expressly repudiated" the contract, explaining that the transaction was "no longer in the best interest" of Keys Federal. It is "extremely difficult," said Power Financial's complaint, for it to purchase replacement mortgage loans because it "is limited by state regulation to specific preapproved geographic areas" related to its field of membership. "Mortgage loans available for purchase in the communities in which Power Financial has members are often not suitable for purchase because of the current real estate conditions in those communities," the document said. The complaint noted that on Oct. 12, Power Financial received consent for the sale from the Florida Office of Financial Regulation, and on Oct. 19, Power notified Keys' attorneys of the approval, but never heard back on the matter.


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