CAPE CORAL, Fla. — The NCUA watchdogs may be trying to salvageboth Norlarco Credit Union in Fort Collins, Colo. and Huron RiverArea Credit Union in Ann Arbor, Mich., but potential losses fromconstruction loans both made to build homes here are increasing asdefaults soar. And the black eye from negative PR the credit unionmovement may get from the many lawsuits filed that involve the CUsmay make survival difficult. Finding a CU willing to merge witheither one may be just as problematic.

Both CUs are being sued by people claiming they were defraudedby First Homebuilders, which is owned by Hovnanian Enterprises, ofRed Bank, N.J., and also names several other lenders andreal-estate agencies, including the brokerage firm of D'Alessandro& Woodyard.

The down real estate market is blamed by all for their woes, asthey claim the southwest Florida market may be the worst in thecountry. Reports cite a peak in December 2005 for a single-familyhome with a median price of $322,300. In July, the price was$246,100, a drop of almost 24%.