ALEXANDRIA, Va.-Just as the economy has led many Americans to retool, adjust their skills, or seek a new career, the tough times have prompted NCUA to make some role changes as well-including becoming a better landlord.

Not that it's a brand new skill for the agency, which has always had to manage assets when it takes over a credit union, such as repossessed autos, a business office or foreclosed-on homes. It's just had to do a lot more of it and for a longer period of time due to the downturn.

NCUA's Asset Management Assistance Center (AMAC) in recent years has had to nearly double staff, especially finding people with property management backgrounds, and find ways to work more closely with outside resources to manage a large number of foreclosed properties, most of them in Florida's Lehigh Acres and Cape Coral areas.

"We have 76 total staff in AMAC now, organized in three divisions-the division of liquidation and member services, the division of asset recovery, and the division of accounting services," explained Don Klein, deputy to the president of AMAC. "The asset recovery people are the ones who try to collect on the loans we acquire and try to maximize the value in selling repo's. The accounting people provide in-house accounting support, and liquidation and member services go out and close down the credit union, meet with members, and wrap up the operation."

 

'Things Got Really Bad'

The housing bust that hit Cape Coral and Lehigh Acres on Florida's southwest coast in 2007 was a strong sign of what was coming for most of America in 2008. Those are the areas at the center of the Norlarco CU and Huron River Area FCU failures, where both got involved in lending to developers out of state, which eventually sank both credit unions (Credit Union Journal, Feb. 23, 2009).

As a result, NCUA found itself with an astounding 800 homes on its hands, and for a much longer period of time than it ever expected. "Yes, we have been carrying these homes beyond our original projections," said Klein. "We knew it would take some time to work through all these properties, but then the problems with the national economy arose and as we all know, things got really bad in Florida."

NCUA has whittled down the total of South Florida homes it has to sell to 300 today, thanks in part to a rental program. Klein described some of the issues facing the agency in its new, expanded landlord role.

"Sure, we had real estate under management before, but suddenly we had 800 vacant homes all at once. We had to find a way to effectively market them, and we started a rental program that today has about 200 homes in it. That has offset some of our holding costs."

The AMAC has never seen itself as a handy man, but it has had to quickly learn how to work closely with contractors to improve a home's condition and get it ready for sale. "We don't get into rehabbing a home. If any property we bring in is in very poor condition, we try to sell it off immediately," said Klein.

 

Dealing With Thieves

During the course of managing the South Florida homes, the AMAC team has had to deal with thieves rampantly stealing copper material out of air conditioners, having to place cages around the units. It also had to replace drywall in a sections of homes due to problems with drywall brought in from China (Credit Union Journal, June 1, 2009).

"Just a lot of new things, and a lot more of them, than we had to deal with in the past," summed up Klein.

AMAC contracts with property managers to handle the weekly chores of monitoring homes, making sure they remain presentable, and to check for repairs. It also contracted with property management firms to manage the buildings acquired when NCUA took control of WesCorp in California and U.S. Central in Kansas, which the agency still owns.

Klein said NCUA has taken control of about $34 billion in assets-mostly investments-on the corporate side of the ledger. On the natural-person CU side, AMAC currently has about $871 million in assets-$137 million in real estate loans, $262 million in consumer loans, $148 million in business loans, and $35 million in REOs.

The size of AMAC's portfolio it manages on the natural-person side came down in 2011, after rising steadily from 2008 through 2010. "We were able to sell off more assets than we brought in last year, a good sign the condition within the credit union industry is improving," said Klein, who added that after conserving Telesis Community CU, Chatsworth, Calif., this summer the portfolio size has increased. "We added about $205 million in assets."

Subscribe Now

Authoritative analysis and perspective for every segment of the credit union industry

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.