In an article in the Las Vegas Review Journal, John Edwards writes about three partners that invested in commercial real estate in Las Vegas and received financing through Ensign FCU, which was later seized by NCUA. The partners defaulted on the loan and NCUA is foreclosing on the property and is suing to enforce the personal guarantees.
The article points out that none of the three partners were members of Ensign and that they were referred to the credit union by a broker. The amount borrowed was $1.4 million.
This raises an important question:
How did these partners qualify to get a $1.4 million loan from Ensign FCU?
Moreover, this is not the first instance of loans going to people who were not credit union members.
NCUA has noted that loans went to people who were nonmembers of Norlarco CU and Huron River Area CU and that both credit unions subsequently failed. Air Force FCU is under a Letter of Understanding and Agreement for serving people who were not qualified for membership.
If this is an emerging pattern of credit unions flaunting their membership requirements, then this is very troubling and requires a closer examination of their preferential tax treatment.
In my experience, large commercial loans are almost always made to people that are at best, not members who have solid and established credit union accounts. These guarantors normally have private or executive banking accounts at the local banks. That is best case. There are many times when most of the participants who sign guarantees are not members and reside out of state. Expect to see more of these problems in future MLR's. You might press the NCUA for more detailed audit results of the CU's with better CAMEL ratings. I'm sure they are lending to non-members.
ReplyDeleteOr, we could simply punish the offenders, and not the whole lot fo the misdeeds of others.
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