FORT MYERS, Fla. – A state appeals court Friday upheld a lower court ruling and cleared the way for NCUA to foreclose on home loans made by Michigan’s Huron River Area CU as part of the “Millionaire University” get-rich scheme.
In its ruling, the Second District Court of Appeal of Florida said though the loans may have been issued fraudulently by a third-party lender that eventually assigned them to the now-failed Michigan credit union, the fraud committed was in the inducement of the loan and not by NCUA, which as liquidator of the one-time $360 million credit union is insulated from the fraud claim.
The court also ruled that even though the loans were assigned to the Huron River Area CU in violation of its field of membership “neither Michigan law nor federal law provides an individual with a cause of action against a credit union for a breach of its bylaws.”
The seven borrowers in the case were among more than 2,000 investors from all over the country who were induced to take out home mortgages from credit unions and banks financing two major real estate developments in southwest Florida, known as Cape Coral and Lehigh Acres. The borrowers were induced to participate in the land-flipping scheme in exchange for promises of returns of as much as 14% in a year’s time.
Three credit unions provided much of the mortgages, Michigan’s Huron River Area CU, Colorado Norlarco CU and New Horizons Community FCU, all of which eventually failed when the get-rich-quick scheme collapsed, leaving NCUA with mortgages on more than 1,700 properties and hundreds of millions of dollars of losses after it took over the failed institutions.