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Second insurer sues to block claims in mortgage fraud

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NEWARK, N.J. (3/1/10)--The liquidating trustee of U.S. Mortgage Corp./CU National Mortgage LLC filed its response last week to a lawsuit by Lloyd's of London that seeks to block any potential claims from credit unions related to their losses when the mortgage companies went bankrupt after fraud was discovered. The case was filed in U.S. Bankruptcy Court for the District of New Jersey Tuesday. Lloyd's had issued Mortgage Bankers and Mortgage Brokers Professional Liability and Fidelity policies to U.S. Mortgage, the parent company of CU National Mortgage. The mortgage companies closed in 2009 after it was discovered they sold mortgages on behalf of credit unions to Fannie Mae without their knowledge and pocketed nearly $140 million. The insurance company is attempting to block claims from three credit unions that have filed suits in the matter--Picatinny FCU, Dover, N.J.; Suffolk FCU, Medford, N.Y.; and Sperry Associates FCU, New Hyde Park, N.Y. The three say they were bilked out of more than $50 million by U.S. Mortgage President Michael McGrath. Lloyd's is asking the court to rescind the fidelity bond it held for the mortgage company because McGrath confessed to fraud. It says it is endangered by the possibility of inconsistent judgments in the cases. If granted, that would mean it would not be liable for the claims. Nearly 30 credit unions have claims for more than $125 million. Lloyd's is the second insurer to seek a block on the claims. CUNA Mutual Group is also seeking a court order related to the bond it holds for 23 of the credit unions bilked by McGrath. Attorneys for the liquidating trustee, Anthony R. Calascibetta, filed a motion seeking relief from the automatic stay requested by the insurance company. The trustee maintains that Lloyd's had full and early notice of the bankruptcy cases pending and the confirmation plan in the bankruptcy. It added that the insurance policy is a core matter and claims regarding it should be decided by the Bankruptcy Court. A hearing is scheduled for 11 a.m. Tuesday on the objection.

CU System briefs (02/26/2010)

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* MADISON, Wis. (3/1/10)--UW CU in Madison, Wis., has announced a partnership with the Wisconsin Home and Economic Development Authority (WHEDA), which will add the WHEDA Fannie Mae Advantage mortgage program to the credit union's line of mortgage products. Available March 1, the WHEDA-backed loans will be available through UW CU for qualified buyers. The mortgage offers up to 100% financing on 30-year fixed-rate loans for first-time homebuyers. Borrowers won't be required to buy private mortgage insurance. The program includes guidelines for purchase price and borrower income limits, which are set per county. "This is an accessible, affordable program for first-time homebuyers," said Paul Kundert, president/CEO of the more than $1 billion asset credit union ... * MACOMB, Ill. (3/1/10)--Western Illinois CU is poised to assist members who are Western Illinois University employees through the state's budget crisis. "We want our WIU members to know we will be there to help them if there is a problem," said WICU President Brenda Coker. "We do not want to alarm our members; we only want to let them know we are prepared to help them." If the state's cash flow problems worsen, the credit union said, members can arrange for short-term loans to help pay their monthly bills. They can schedule a meeting with the credit union to discuss opportunities available for assistance. The credit union services faculty and staff at the university as well as employees of the county school system, including former employees, and their families ... * DES MOINES, Iowa (3/1/10)--Murray Williams, chief operating officer of the Iowa Credit Union League, earned his Certified Association Executive (CAE) credential from the CAE Commission of the American Society of Association Executives (ASAE). Williams was one of 278 association executives nationwide, and one of only two in Iowa, who successfully completed the CAE examination on Dec. 4. He joins 3,600 industry leaders worldwide wit the CAE designation ...

Colorado CU Brighton FCU boards OK merger

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LITTLETON, Colo. and BRIGHTON, Colo. (3/1/10)--The Board of Directors for Colorado CU, Littleton, Colo., and Brighton (Colo.) FCU unanimously approved a merger between the two credit unions. The National Credit Union Administration and the Colorado Department of Financial Services authorized the merger, which was effective Dec. 1. The merger creates a credit union with more than $100 million in assets and three branches, serving more than 8,500 members. Members, assets and employees will be integrated under the Colorado CU name, its state charter status. It will serve eligible multiple select employee groups and Littleton residents. “When evaluating this merger opportunity, it quickly became evident how both memberships would benefit from uniting these two strong credit unions,” said Mike Williams, Colorado CU president/CEO. He noted the credit union will serve the Brighton membership and the Brighton community “with expanded services and competitive rates.” In addition to expanded products and services, the credit union will maintain financial stability and excellent member service, said Roxene Auen, Brighton FCU’s former president and new Colorado CU Brighton branch manager.

Vermont league CEO testifies re state-owned bank

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MONTPELIER, Vt. (3/1/10)--Joe Bergeron, president/CEO of the Association of Vermont Credit Unions (AVCU), recently addressed Vermont’s House Ways & Means Committee regarding legislators’ interest in exploring how a Bank of North Dakota clone might work in Vermont. Bergeron and other panelists had more questions than answers about the merits and practicality of starting a state-owned bank in Vermont, AVCU said. The Vermont legislature isn’t the only state legislature considering the only state-government-owned bank in the country. Florida, Oregon and Washington legislatures also are looking into a state-owned bank (Newslines Express Feb. 26). The Bank of North Dakota has only one office, no drive-up and no ATMs. Although it can do business with the general public by law, it rarely does. Instead, in Vermont terms, it’s an amalgamation of the Vermont Housing Finance Agency, Vermont Student Assistance Corp., and Vermont Economic Development Authority, with some of the corresponding services of a corporate credit union added in, said AVCU. The bank was created 95 years ago, long before the first North Dakota credit union and before most banks. The difference between those institutions and counterparts elsewhere is that they’ve worked with the Bank of North Dakota as a source of student lending, mortgages, business lending and check settlement since their inception. States like Vermont have long since created other relations to fill these needs, posing resistance to major change, AVCU said. However, the knowledge that North Dakota’s state general fund received half of the bank’s profit of $60 million last year likely drew the attention of Vermont legislators, AVCU said.

Prime Financial CU closes branch drive-through

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CUDAHY, Wis. (3/1/10)--Prime Financial CU in Cudahy, Wis., announced it will close its Pewaukee, Wis., branch and a drive-through location in Wauwatosa, Wis. The closings will take effect March 13, said the $185.7 million asset credit union, which will continue to operate six other branches (The Business Journal of Milwaukee Feb. 26). “These were difficult but necessary decisions to help strengthen the credit union and reduce operating expenses,” said Christine Dawe, Prime Financial interim CEO. “We are confident that these steps will help Prime Financial CU continue to be a stable and strong credit union.” In March 2009, the Wisconsin Office of Credit Unions took control of Prime Financial and appointed Dawe to run it, the Journal said. The credit union had assets of $185.7 million as of June 30--the most recent report available. Prime Financial reported a net loss of $3.1 million for the period ending June 30.

Five CUs offering NYC SafeStart Accounts

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NEW YORK (3/1/10)--Five credit unions in New York City are participating in the NYC SafeStart Bank Account program highlighted by Mayor Michael Bloomberg during his 2010 State of the City Address as the first of its kind to assist the unbanked and underserved. The account is an ATM-based started account designed to help New Yorkers avoid costly fees such as overdraft fees or monthly account fees. Fees are the top reason that unbanked city residents do not use--or stop using--banks or credit unions, according to a city survey. The account, which can never be overdrawn, is being offered in partnership with 10 banks and credit unions, said a press release from the New York City Department of Consumer Affairs. Credit unions participating are Bethex FCU, Bronx; Brooklyn Cooperative FCU, Brooklyn; Lower East Side Peoples FCU, New York; Neighborhood Trust FCU, New York; and Union Settlement FCU, New York.

Louisiana league honors Mica for dedication to CUs

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HARAHAN, La. (3/1/10)--The Louisiana Credit Union League Board of Directors has honored Credit Union National Association President/CEO Dan Mica with a resolution and a contribution to the Credit Union House for his dedication to the credit union movement. Mica recently announced he will retire in January of 2011. The league board adopted a resolution in his honor at its December board meeting. "During his 13 years of service to the credit union movement, he has always been a true believer in the credit union philosophy of 'people helping people' and has provided invaluable leadership," the league said. It noted his integral role in establishing credit unions as "a powerful, ongoing and highly visible presence" in Washington. "He has raised awareness of credit unions across the nation as safe havens for consumers in the midst of the current financial crisis," the league said. He has "worked with CUNA to provide many invaluable services to credit unions and leagues, including regulatory advocacy, compliance and information, public relations, continuing professional education and business development." The league delivered the resolution along with a $5,000 contribution to CU House, a permanent presence for credit unions on Capitol Hill that serves as a welcoming embassy for credit union visitors in Washington D.C. and as a grassroots advocacy tool. It was the first league to recognize Mica with such a resolution and contribution.

MnCUN CEO touts safety difference in newspaper

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ST. PAUL, Minn. (3/1/10)--Mark D. Cummins, Minnesota Credit Union Network (MnCUN) president/CEO, used the pages of Finance & Commerce newspaper last week to educate readers about the credit union difference. A regular columnist for the publication, his article, titled “Credit unions as safe as banks, often more accessible,” was published in the newspaper’s “Association Update” section Thursday. The article explained the essence of the credit union difference, noting credit unions’ not-for-profit cooperative structure, democratic nature, and field of membership restrictions. Cummins also said that credit unions are critical to the financial stability of ordinary Minnesotans because they provide high-quality, low-cost financial services--which is as important in today’s economy as it was when credit unions were founded in the U.S. 100 years ago. “With the common philosophy of ‘people helping people,’ never have credit unions been more relevant as the industry helps Minnesota consumers ensure their own financial health and well-being,” Cummins wrote. The continued safety and strength of credit unions also was central to Cummins’ message. He used the forum to reassure consumers that credit unions are a viable alternative with deposit insurance coverage that is at the same levels as banks. “Credit unions are a vitally important part of Minnesota’s financial services landscape … and provide competition and choice,” Cummins wrote. “When credit unions provide exceptional service to their members, they raise the bar for all other financial institutions. Ultimately, all consumers benefit.” To read the column, use the link. MnCUN’s next column is slated to run March 26.