Southeast Wisconsin credit unions that lost millions in the March bankruptcy of Central States Mortgage Co., a CU-owned CUSO, have reached a settlement allowing them to recover claims totaling $72 million.
In a brief statement, attorneys for 24 Wisconsin and Illinois CUs, which were investors in the mortgage CUSO that closed its doors in February after a pool of subprime loans went foul, said an agreement with a court-appointed Milwaukee receiver “will for the most part” settle the case for the credit unions.
Apparently still in question, however, is a $32.5 million funding loan extended to Central States by Members United Corporate FCU of Warrenville, Ill. It was unclear if that loan figured in what were described by Wisconsin attorneys as “conflicted” claims in connection with the bankruptcy.
A spokeswoman for Members United declined comment on the CSMC case because it is a matter still in litigation.
But Daniel McGarry, a Milwaukee attorney representing the Wisconsin CUs, said the so-called “credit union pool investors” have indeed reached a settlement with the receiver “to transfer certain loans and other real property to the credit unions.”
“The transfer will permit the credit unions to service the loans and liquidate their real property,” said a press statement. The agreement was reached on Oct. 23 with the receiver, Michael Polsky, appointed by a Milwaukee County Circuit judge.
The statement quoting McGarry noted that the settlement “represents a practical resolution of a difficult situation” for the participants.
“In light of all the circumstances, we believe this will provide the credit unions the best opportunity to maximize the value of their assets,” said McGarry, a member of the Milwaukee firm of Whyte Hirschboeck Dudek.
Milwaukee media reports also said a separate settlement had been reached on bankruptcy claims involving CU Fleet, a West Allis, Wis., auto dealership that held CU leases that went bad.
In the case of CU Fleet, The Milwaukee Business Journal quoted the receiver, Polsky, saying he “anticipates recovering loans and vehicles totaling about $10.5 million.”
Central States, headquartered in the Milwaukee suburb of Wauwatosa, was 70% owned by credit unions mostly in Wisconsin but two near Chicago, many of which provided cash for the mortgage financing pool.
“The CU Fleet news and the agreement in Central States' receivership mean that Milwaukee-area credit unions might get some relief from the losses that have hammered their financial reserves the past year,” said the Journal article.
Over the summer three small suburban Milwaukee CUs, all with losses tied to Central States, were quietly merged into the $1.4 billion Landmark CU, the state's largest. Earlier Prime Financial CU of Cudahy, also with CSMC loans, was placed into conservatorship by state regulators.
–[email protected]