Lender's Bankruptcy Leaves CUs High and Dry

Dozens of credit unions around the country are struggling to untangle their finances from a San Francisco mortgage banker that filed for bankruptcy last month.The Chapter 7 filing by LoriMac Inc. has caused the U.S. Bankruptcy Court to freeze millions of dollars in credit union funds, leaving thousands of credit union borrowers who had their mortgages serviced by LoriMac in the dark, according to a report in The Credit Union Journal, a sister publication to MortgageWire. Steinbeck Credit Union president Mike McHale said, "I see this as the start" of the potential for credit union exposure in the melting mortgage market. Based in Salinas, Calif., Steinbeck had more than $500,000 in mortgages serviced through LoriMac. Roughly $6,000 of its funds was frozen by the courts. It is one of 30-plus credit unions -- most of them small -- listed as creditors for the failed mortgage lender. Most, if not all, of LoriMac's business appears to have been with CUs. Its biggest CU customer was Transit Employees FCU, Washington, which had $17.2 million of its loans serviced by the company.