Much of the losses are tied to the failed subprime auto loan program promoted by Centrix Financial, which resulted in hundreds of millions of dollars in credit union losses. But the red ink doesn’t stop at Centrix. The economic woes moving around the country are exacerbating poor underwriting in many credit unions, forcing credit unions to boost loan loss reserves, report large losses and, in many cases, shutter their subprime or indirect auto loan programs.
Even credit unions without subprime programs are being dragged down because of their participation in subprime loan pools. The CEO of one Florida credit union attributed its $270,000 third quarter loss to the millions of dollars in Norlarco auto loan participations his credit union is holding. Those are different than the participations Norlarco sold in pools of south Florida real estate loans.
And dozens of credit unions are negotiating claims on millions of dollars in participations bought from other credit unions through the Centrix subprime loan program, which may have caused as much as $1 billion in losses for the 150 or so credit unions that participated in it. (Credit Union Journal)