Borrowers who claim they were fraudulently lent money by the now failed Huron River Area Credit Union have sued NCUA in an attempt to stop the agency from collecting on the allegedly fraudulent loans.
NCUA took over the credit union in February 2007 and finally liquidated it in November 2007.
The twenty-eight borrowers, from nine states, argued that the loans they were fraudulently sold were fraudulent many times over. Because they lived outside Huron River's field of membership, the borrowers said they were never eligible to have become members of Huron River and thus borrowers from the credit union. Further, they did not know they were being made members of Huron River and never claimed, as the construction company and credit union had, that they were buying homes as anything other than investment properties.
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The construction company and credit union had claimed to both state and federal regulators, the borrowers alleged, that they were members of the credit union and purchasing property to live in. Because of these frauds, they argued, NCUA should not be allowed to collect on the loans as liquidator of the failed CU.
"It would be unjust and against equity to allow CLC or the NCUA acting as liquidating agent for Huron to enforce the mortgages and promissory notes against the Plaintiffs, to obtain ownership of the real property securing those mortgages, and to exact money from the Plaintiffs based upon the mortgages and promissory notes," the borrowers argued in their complaint. "To allow the NCUA as liquidating agent for Huron to enforce the illegally funded and illegally assigned mortgages and notes against the Plaintiffs would be enforcing an illegal contract, which the law does not allow, and would be against public policy."
NCUA declined to comment, citing pending litigation.
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