Southeast Wisconsin credit unions that lost millions in theMarch bankruptcy of Central States Mortgage Co., a CU-owned CUSO,have reached a settlement allowing them to recover claims totaling$72 million.
In a brief statement, attorneys for 24 Wisconsin and Illinois CUs,which were investors in the mortgage CUSO that closed its doors inFebruary after a pool of subprime loans went foul, said anagreement with a court-appointed Milwaukee receiver “will for themost part” settle the case for the credit unions.
Apparently still in question, however, is a $32.5 million fundingloan extended to Central States by Members United Corporate FCU ofWarrenville, Ill. It was unclear if that loan figured in what weredescribed by Wisconsin attorneys as “conflicted” claims inconnection with the bankruptcy.
A spokeswoman for Members United declined comment on the CSMC casebecause it is a matter still in litigation.
But Daniel McGarry, a Milwaukee attorney representing the WisconsinCUs, said the so-called “credit union pool investors” have indeedreached a settlement with the receiver “to transfer certain loansand other real property to the credit unions.”
“The transfer will permit the credit unions to service the loansand liquidate their real property,” said a press statement. Theagreement was reached on Oct. 23 with the receiver, Michael Polsky,appointed by a Milwaukee County Circuit judge.
The statement quoting McGarry noted that the settlement “representsa practical resolution of a difficult situation” for theparticipants.
“In light of all the circumstances, we believe this will providethe credit unions the best opportunity to maximize the value oftheir assets,” said McGarry, a member of the Milwaukee firm ofWhyte Hirschboeck Dudek.
Milwaukee media reports also said a separate settlement had beenreached on bankruptcy claims involving CU Fleet, a West Allis,Wis., auto dealership that held CU leases that went bad.
In the case of CU Fleet, The Milwaukee Business Journal quoted thereceiver, Polsky, saying he “anticipates recovering loans andvehicles totaling about $10.5 million.”
Central States, headquartered in the Milwaukee suburb of Wauwatosa,was 70% owned by credit unions mostly in Wisconsin but two nearChicago, many of which provided cash for the mortgage financingpool.
“The CU Fleet news and the agreement in Central States'receivership mean that Milwaukee-area credit unions might get somerelief from the losses that have hammered their financial reservesthe past year,” said the Journal article.
Over the summer three small suburban Milwaukee CUs, all with lossestied to Central States, were quietly merged into the $1.4 billionLandmark CU, the state's largest. Earlier Prime Financial CU ofCudahy, also with CSMC loans, was placed into conservatorship bystate regulators.
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