CU Hurt in Loan Scam Must Raise Capital

The National Credit Union Administration has issued a supervisory order directing Sperry Associates Federal Credit Union, Garden City, N.Y.—one of the biggest victims in the $140 million U.S. Mortgage/CU National Mortgage scam and a major investor in loan participation pools—to boost its capital. The Letter of Understanding and Agreement signed with NCUA may reverberate even further because it will require the $360 million asset CU to charge off $1.3 million of nonperforming participations it had from loans originated by the failed Cal State 9 CU, and another $1.9 million of participations in troubled South Florida loans. The supervisory order could spell trouble for hundreds of other CUs that hold participations in troubled real estate loans around the nation. Sperry Associates, which is fighting Fannie Mae for the return of $9.5 million of its mortgages fraudulently sold to the GSE by CU National, was cited for declining capital, participation losses, potential unrecognized investment losses and inadequate testing of high-risk areas. In return for agreeing to the Letter of Understanding and Agreement, NCUA will refrain from issuing an administrative order against the credit union.