Superior Choice CU Sues NCUA for $10M

Superior Choice Credit Union is suing the NCUA, alleging it sold loans improperly when acting as conservator for the now-defunct Norlarco CU.The Superior, Wis.-based credit union alleged that Norlarco Credit Union of Ft. Collins, Colo., failed to disclose that 45 of the 112 loans it sold to Superior Choice were for the construction of investment properties-rather than owner-occupied-which represented a greater potential financial risk.The suit was filed last week in U.S. District Court in Denver.The NCUA already paid Superior almost $700,000, but the credit union is seeking the additional money because it has about $10 million in additional bad loans.In 2005, Noralco asked Superior Choice to participate in the loans, but Superior Choice alleges that Norlarco failed to disclose the existence of an agreement that would leave Superior holding bad debt if the borrowers defaulted. State and federal regulators seized Norlarco in July 2007 when mortgage defaults on the properties escalated. The NCUA eventually liquidated Norlarco.There were three credit union failures as a result of bad real estate deals: Norlarco, Huron River Area Credit Union of Ann Arbor, Mich., and New Horizons Community Federal Credit Union in Denver.Norlarco funded over 1,000 homes in Lee County, Fla., in Lehigh Acres and Cape Coral for a total of $238.4 million.NCUA declined to comment on the lawsuit.–[email protected]