ALEXANDRIA, Va. (4/9/12)--A National Credit Union Administration (NCUA) Office of the Inspector General (OIG) review of the agency's Asset Management Assistance Center (AMAC) found "deficiencies over the valuation process of real estate owned (REO) by AMAC."
The NCUA's AMAC conducts credit union liquidations and performs management and recovery of assets, and can, at times, assist NCUA regional offices with the review of large complex loan portfolios and actual or potential bond claims, the NCUA OIG said.
Many of the properties cited in the report were owned by now-defunct credit unions Norlarco CU and Huron River Area CU.
Norlarco, of Fort Collins, Colo., was placed into conservatorship by state regulators in May 2007, and the credit union was eventually purchased by nearby Public Service CU, Denver, Colo. Huron River Area CU, Ann Arbor, Mich., was taken under NCUA control in early 2007, and was liquidated later that year.
Credit risk and strategic risk were major factors in the failures of both of these credit unions, and the NCUA OIG in an earlier report on both failures said the management of each credit union failed to adequately manage and monitor the credit risk within their loan programs.
Both failures led to 850 properties that were owned by the credit unions being taken over by the NCUA, and 409 of those properties have been sold so far, the OIG report said. These NCUA-owned properties have sold for around 42.8% of their market value, on average, according to the report.
The NCUA OIG report specifically noted that AMAC did not perform valuations on the properties in accordance with industry standards and did not always maintain proper support for the valuations that were completed.
In the report, the OIG recommended that NCUA AMAC improve its review and documentation process for appraisals over $250,000, perform and document their analysis when determining whether to maintain properties versus selling them in a bulk sale, and improve its account reconciliation processes. Other recommendations were also made, and the AMAC agreed to follow the majority of the recommendations. The AMAC also noted that it has already acted to address some of the deficiencies identified in the OIG report.
For the full OIG report, use the resource link.