UNITED STATES OF AMERICA

BEFORE THE NATIONAL CREDIT UNION ADMINISTRATION

In the Matter of

**Office of Small Credit Union** *Docket BD 08-06*

**Initiatives**

Claim

**Decision and Order**

**Decision**

This matter comes before the National Credit Union Administration Board
(Board) as an administrative claim of the determination by the agent for
the liquidating agent of D. Edward Wells Federal Credit Union, denying
the Office of Small Credit Union Initiatives (formally the Office of
Credit Union Development) claim in the amount of \$51,890.52.

**Background**

D. Edward Wells Federal Credit Union (FCU) was chartered in 1959. It was
a low-income credit union chartered to serve the members of the Mt.
Calvary Baptist Church and Brotherhood of Springfield, MA, immediate
family members and organizations of such persons. The FCU historically
had persistent problems in the areas of capital adequacy, earnings and
management. The FCU was placed in conservatorship on February 21, 2003.
Staff from NCUA's

Region I served as the conservatorship staff. During the
conservatorship, staff discovered that the FCU was insolvent. The NCUA
Board placed the FCU into liquidation on May 17, 2003. NCUA named itself
as the liquidating agent and appointed several Asset Management and
Assistance Center (AMAC) staff members as agents for the liquidating
agent.[^1] In February of 2006, NCUA filed a civil suit against (b)(6) ,
as well as others involved in the FCU. Criminal charges have now been
filed against (b)(6) related to the failure of the FCU. NCUA's civil
lawsuit seeking damages has been stayed pending the ongoing criminal
case.

**OSCUI (previously OCUD) Claim**

In 1999, the NCUA, through OCUD[^2], made a \$295,000 loan to the FCU
from the Community Development Revolving Loan Fund (CDRLF). The loan was
booked as a non-member deposit with the entire balance due and payable
upon default. The FCU had a history of late payment on the loan. On
January 2 and February 14, 2003, OSCUI sent the FCU late notices
regarding a loan payment that was due on December 7, 2002. The FCU did
not make the required payment on the loan. As noted, the FCU was placed
into conservatorship on February 21, 2003. On March 7, 2003, OSCUI sent
a letter to the conservatorship staff, demanding full payment on the
loan due to its default. The conservatorship staff responded on April
11, 2003, remitting a check for \$31,309.64, the amount of principal and
interest due on December 7, 2002. On April 17, 2003, OSCUI again
requested payment in full (\$151,890.52) due to default. The
conservatorship staff did not pay out the OSCUI claim and the FCU was
placed into liquidation on May 17, 2003.

On July 1, 2003, AMAC paid OSCUI \$100,000 in insured funds. OSCUI then
requested that AMAC pay OSCUI the remaining balance of \$51,890.52 in
uninsured shares. On November 4, 2003, OSCUI requested that AMAC
reconsider its claim as a contract claim under the loan agreement,
rather than one of uninsured shares. AMAC responded on November 14,
2003, denying the claim was a contract claim and continuing to treat the
claim as one of an uninsured shareholder. There was some additional
correspondence between OSCUI and AMAC. On July 22, 2004, AMAC issued a
final determination denying OSCUI's request to repay its claim as a
contract (creditor) claim and restating its treatment of the claim as
one for uninsured shares. Appeal rights to the NCUA Board were given.
OSCUI requested and was granted an extension of time to file an appeal.
However, no formal appeal was filed. Since both OSCUI and AMAC are
components of NCUA, it was agreed that the OSCUI claim would be
presented to the Board without a formal appeal by OSCUI.

**Analysis**

Pursuant to the Section 207(k) of the FCU Act (12 U.S.C. §1787(k)(1))
and Part 745 of the NCUA Rules and Regulations (12 C.F.R. Part 745),
accounts in federally insured credit unions are insured for up to
\$100,000 per insured account. Section 705.7(c) of the NCUA Regulations,
12 C.F.R. §705.7(c), states that a CDRLF loan can be booked as a
non-member deposit. The loan agreement notes that this loan was so
booked. AMAC correctly treated the OSCUI account as a non-member deposit
and paid out \$100,000 of the \$151,890.52 balance as a non-member
insured account. AMAC was limited by the FCU Act and NCUA Regulations to
a payout of \$100,000 for an insured non-member account. However, the
conservatorship staff for the FCU should have paid the defaulted loan in
full once it received demand for payment under the loan agreement during
the conservatorship. Liquidity (or lack thereof during the
conservatorship) was not an issue. The conservatorship staff had
increased the line of credit with the corporate and used it to pay out
other accounts. Funds were available to the conservatorship staff to pay
off the loan.

Section 207(f) of the FCU Act (12 U.S.C. §207(f) is entitled [Valuation
of Claims in Default]{.underline}. It states in part as follows:

(1) In general. -- Notwithstanding any other provision of Federal law or
    the law of any State, this subsection shall govern the rights of the
    creditors (other than insured accountholders) of such credit union.

> ...
>
> \(3\) Additional payments authorized. --
>
> \(A\) In general. -- The Board may, in its discretion and in the
> interests of minimizing its losses, use its own resources to make
> additional payments or credit additional amounts to or with respect to
> or for the account of any claimant or category of claimants. The Board
> shall not be obligated, as a result of having made any such payment or
> credited any such amount to or with respect to or for the account of
> any claimant or category of claimants, to make payments to any other
> claimant or category of claimants.\
> \...

Section 207(f) provides the appropriate authority for the Board to
authorize payment of the OSCUI claim.

**Order**

For the reasons set forth above, it is ORDERED as follows:

The Board directs the NCUA's Asset Management & Assistance Center to pay
the Office of Small Credit Union Initiatives \$51,890.52 from the Share
Insurance Fund for deposit into the Community Development Revolving Loan
Fund (Account 25X4472).

The Board's decision constitutes a final agency determination.

So **ORDERED** this 14^th^ day of December 2006 by the National Credit
Union Administration Board.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Mary Rupp

Secretary of the Board

[^1]: References to AMAC throughout this decision refer to AMAC staff
    acting in their capacity as agents for the liquidating agent.

[^2]: All further references to this claim are made to OSCUI since that
    is the office that currently exists within NCUA that is responsible
    for the Community Development Revolving Loan Fund. OSCUI replaced
    OCUD in December 2004.