Credit unions with mortgage loans that were fraudulently sold by a since failed mortgage firm face possible dire regulatory consequences if Fannie Mae does not return a significant amount of their lost money, suggested NCUA Board Chairman Debbie Matz.
Matz warned of the possible regulatory action in a Nov. 9 letter to Edward DeMarco, acting director of the Federal Housing Finance Agency. Matz wrote DeMarco to obtain more of his agency's support in resolving a complaint among some credit unions against Fannie Mae.
The dispute dates back to the now-bankrupt CU National/US Mortgage Corp. whose CEO, without permission, sold some loans owned by credit unions to Fannie Mae and then pocketed the proceeds. The CEO has pled guilty and awaits sentencing, but the credit unions are still struggling to make good their losses from his actions.
Matz's Nov. 9 letter recounted the work efforts both regulators have brought to the table but also the frustration the NCUA and the credit unions felt about what they view as Fannie Mae's intransigence.
"While I am extremely appreciative of the cooperation and assistance your OGC [Office of General Counsel] has provided in attempting to brings about a resolution to this matter, I am concerned that Fannie Mae has not made a larger, more reasonable settlement offer to the affected credit unions," Matz wrote. "I appreciate that Fannie Mae is also a victim of this crime. However, the financial impact of CU National's fraud on these member-owned cooperatives is significant. Indeed, for some of the credit unions, their losses will be so great as to force our agency to take drastic action under the prompt corrective action rules," she added.
"This outcome seems especially egregious considering Fannie Mae's status as a government-sponsored enterprise, and doubly so in light of the fact that it is current in conservatorship and receiving billions of dollars of taxpayer assistance. In our view, it is manifestly unfair to permit a government-sponsored enterprise that survives solely because of massive infusions of tax dollars to benefit from a fraud perpetuated by an entity it held out to the public as an 'approved business partner,'" she added.
The FHFA had no comment on the letter as of press time.
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