The abrupt shutdown of Central States Mortgage Co., a Milwaukee CUSO, underscores the urgent need for credit unions to perform "full faith due diligence investigating third parties before jumping into this kind of business," Wisconsin's top CU regulator warned Wednesday.
Sue Cowan, director of the Office of Credit Unions, said her job now and that of other regulators including NCUA is on "how to fix the problem" and assess losses by the 23 Wisconsin shareholders plus two in Illinois.
Cowan, who is slated to meet Wednesday with CEOs of the participating Wisconsin CUs in CSMS joined by current management of CSMC, said discussion will focus on "what their future plans are" following Monday's shutdown of its Wauwatosa headquarters in suburban Milwaukee.
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The Wisconsin regulator said she did not anticipate any further conservatorships by her office following the Feb. 27 takeover of the $190 million Prime Financial CU of Cudahy, one of the CSMC investors which reportedly lost $8 million.
While the CSMS has been written down, "we still have to find out what is in the loan pools" and the losses there by participating CUs are still undetermined, she said.
She also "surmised" that the sudden CSMC closing followed the calling of a reported $33 million defaulted loan and funding by Members United Corporate FCU of Warrenville, Ill.
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