Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive
150x172_CUEffect.jpg
Contacts
LISA MCCUEVICE PRESIDENT OF COMMUNICATIONS
EDITOR-IN-CHIEF
MICHELLE WILLITSManaging Editor
RON JOOSSASSISTANT EDITOR
ALEX MCVEIGHSTAFF NEWSWRITER
TOM SAKASHSTAFF NEWSWRITER

News Now

CU System
Court: CU Can't Pursue Acquired CU's Legal Claims
DENVER (3/26/13)--A federal judge in Denver has dismissed Security Service FCU's lawsuit over fraudulent mortgage construction loans sold to New Horizons Community CU before New Horizons went into conservatorship and was acquired by Security Service.

U.S. District Senior Judge Wiley Y. Daniel of the U.S. District Court for the District of Colorado ruled that "Security Service is not the proper plaintiff in this action and therefore its claims are dismissed with prejudice."

At issue were 26 construction loans financed by New Horizons in an agreement that occurred Aug. 1, 2003. Defendants in the case are First American Mortgage Funding (FAM) and several title companies.

Last Wednesday's ruling noted that in the purchase and acquisition (P&A) agreement between the National Credit Union Administration--New Horizon's liquidating agent--and the San Antonio-based Security Service, NCUA transferred  New Horizons' assets but "retains, for the benefit of the liquidation estate of the liquidating credit union (New Horizons), the sole right to pursue claims (through arbitration, litigation, insurance claims, bond claims or otherwise) and to recover any and all losses incurred by the liquidating credit union prior to liquidation."

Security Service had argued that its P&A agreement with NCUA assigns and transfers any and all evidence that could possibly be used to litigate claims arising from New Horizon's losses to Security Service.

However, the judge noted, Provision 9 of the agreement also grants NCUA "unconditional access" to such evidence and that the credit union agreed "to cooperate in any investigation of the liquidating credit union" as well as agreed to assist NCUA in "documenting any bond claim the liquidating agent (NCUA) may file in connection with losses sustained by" New Horizons.

New Horizons Community, a Denver-based credit union, was one of three credit unions that collapsed as a result of the mortgage construction loan fraud scheme, which involved "straw buyers"--people who allegedly were paid by defendants FAM and the title companies to use the borrowers' personal information and credit score to secure the loans, according to the ruling.

The straw buyers defaulted, leaving several million dollars in debt and contributing to New Horizons' conservatorship in April 2006. NCUA and Security Service entered the P&A agreement on July 10, 2007. Security Service's suit alleged breach of contract, breach of fiduciary duty, negligence, negligent misrepresentation, conspiracy and fraud.

The fraud also led to conservatorships of Fort Collins, Colo.-based Norlarco CU and Michigan-based Huron River Area FCU.


RSS





print
News Now LiveWire
Cornerstone CU Union Foundation says it's prepared to assist #CUs & their employees affected by severe storms in Arkansas and Oklahoma.
2 hours ago
In 2014,use of remote deposit capture experienced 13% increase to 51%. But checking a balance continued to B the most common mobile activity
2 hours ago
'Fixing Your Finances' part of @PCUA's #iBelong campaign http://t.co/7j6HO1njog @fox43 @Bellco_CU @Members1stFCU
5 hours ago
Home prices outpacing income growth in 3/4 of U.S. markets @RealtyTrac http://t.co/BQR1w4k822
8 hours ago
Refinance #MarchMadness: Refis drive up mid-March mortgage apps: MBA http://t.co/rTUnlJB516
11 hours ago