Poor decisions by management, including risky investments and inadequate oversight by examiners, caused the failure of Ensign FCU and Clearstar Financial CU, which cost the NCUSIF $42 million, according to reports by the NCUA's Office of Inspector General.
The failure of Ensign, which is likely to cost the NCUSIF $30 million, was caused by management's failure to "implement appropriate risk-management practices." These included allowing 40-year mortgages, allowing loan-to-value ratios on HELOCs to rise to as high as 100%, and not having a proper allowance for loan loss methodology.
In addition, the NCUA's examiners didn't downgrade the credit union's CAMEL ratings quickly enough as its problems escalated and thus "missed opportunities to mitigate losses to the NCUSIF."
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