AUSTIN, Texas — The NCUA's Asset Management Assistance Center was created in 1990 precisely to unload foreclosed assets the agency receives from conserved credit unions. It just never envisioned there'd be so much of it to unload.

The failure of several credit unions that made poor choices in granting real estate loans has swelled the coffers at AMAC and challenged it to efficiently manage those assets until they can be sold, making it a de facto real estate management company.

Mike Barton, the director of AMAC told Credit Union Times that at the end of 2006 AMAC had fewer than 100 homes to sell. Now it has 1,091 thanks to Norlarco, Huron River Area, and New Horizons CUs. Barton has the bona fides to deal with distressed real estate loans, however, thanks to his experience with the savings and loan meltdown of the 1980s. He worked for the Resolution Trust Corp., which dealt with the assets of more than 700 defunct thrifts to the tune of $394 billion. That experience was very helpful, said Barton, who added that many of his the AMAC staffers have similar experience.

AMAC currently has no commercial real estate, only residential, and 99% of it is in Florida. The CU book value of assets has grown to about $218 million, Barton said. Now, it's anyone's guess what price the market will pay.

NCUA's Executive Director Len Skiles, who previously was director of AMAC and worked with Barton there, noted that NCUA “is not a real estate developer and never intended to be one but, when we formed AMAC, it was because we recognized that we needed expertise in that area. We saw that we needed the ability to handle real estate management or loans, even commercial loans, because back then we had some of those as well. We just needed to be able to manage them effectively. Now we are well situated to do that. We're also set up to manage an orderly share of payout.”

How is AMAC managing these former real-estate-owned properties from now-defunct credit unions, all located hundreds of miles away in sunny Florida? It does so through two professional property management companies it has hired that do light maintenance and periodically inspect the houses. Those companies' workers visit the properties on an ongoing basis, turn the air conditioning on and off, run the water to clear the pipes, see that lawns are kept up and check for necessary repairs and any vandalism.

AMAC has a permanent staff of 17 and a contract staff of 23 people right now. The contract staff can expand or contract as necessary and is paid or will be paid from money recovered from the sale of the assets. Some of the contracts are short-term, Barton explained, as short as 90 days, but can also include terms as long as one year or longer.

The hiring process was troublesome, he said, as many of the firms asked to bid on the work were unable to manage so many houses. The two firms that do the work, which NCUA declined to name, have a full-time staff of their own, and the agency receives regular reports from them. That contract is for a year and can be cancelled on 30-days notice. “We just don't know when we'll move these assets,” said Barton.

Although the agency has sold a few houses back to the original borrowers through refinancings, that good outcome is not soon expected for the bulk of the real estate it holds now. Last December, an attempt to sell off a $26 million portfolio (100 homes in Cape Coral, Lehigh Acres and Northpoint) through online seller DebtX was later withdrawn for lack of interest.

Neither Skiles nor Barton would forecast how much AMAC expects to make on the dollar because it would tip their hand to any potential investors. But they did allow that offers were made and rejected.

“From these [eventual] sales we achieve far greater return than through selling to investors in bulk,” said Barton. “They need financing when they buy in bulk, and the credit markets are not conducive right now. Until that settles down, financing may be difficult for large bulk sales.”

Even if financing were available, the agency couldn't move swiftly to unload many properties because they are still in the loan stage, and NCUA does not have full title through foreclosure. “Not many are in the hands of brokers as yet, but we'll see a significant jump in that in the next month,” said Barton. The NCUA only has title to some 37 units and is also trying to acquire deeds by having borrowers sign them over. The local county property office in Florida is having trouble processing so many foreclosures, said Barton. “We initiated foreclosure some months ago. They have a real bottleneck, though.”

The numerous lawsuits surrounding these home sales do not complicate things for AMAC because, as Skiles offered, “We are in the place of the lender, and they deal with us as if we are the original lender–that's the legal relationship. We're not dealing with Hovnanian [the original builder] either.”

There's no set timeframe for the agency to sell all this property, but they'd definitely like to be able to move it. “If we can't do that, then we have to do what we're doing now, and we're set up to manage it,” said Skiles.

“We're not forced to sell at fire-sale prices, and while things are very unsettled right now, experience has shown me that there are cycles in real estate, and when the recovery comes we'll make the move,” said Barton. “The trick is not to settle for less if you don't have to. Some institutions don't have that luxury.”

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