free money from NCUA 6years after CU failure?

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shawn_lad
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free money from NCUA 6years after CU failure?

Post by shawn_lad »

I just got a check for ~$1500 from NCUA with a letter saying that I was a member in a credit union that failed back in 2013 and now that they finished "winding down CU affairs", there are remaining funds of which they are giving me a part. They said it will be treated a taxable dividend (with 1099-INT form at year end).

At the time of failure another CU took over and all of my accounts (including ~200k in CDs) just transferred over to the new CU without me doing anything. So, I did not lose anything and it was almost a non-event for me at the time.

Curious: is this "normal" for when Credit Union's fail?
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dm200
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Re: free money from NCUA 6years after CU failure?

Post by dm200 »

shawn_lad wrote: Tue Aug 20, 2019 9:40 am I just got a check for ~$1500 from NCUA with a letter saying that I was a member in a credit union that failed back in 2013 and now that they finished their affairs, there are remaining funds of which they are giving me a part.
At the time of failure another CU took over and all of my accounts (including ~200k in CDs) just transferred over to the new CU without me doing anything. So, I did not lose anything and it was almost a non-event for me at the time.
Curious: is this "normal" for when Credit Union's fail?
Wow! I have been and am very involved with many aspects of credit unions. I have never heard of this happening - so it is certainly not "normal".

Almost always, when a credit union fails - that credit union is in a serious financial "mess" so that, no matter how it ends up being resolved, there is no excess money. Occasionally, a federally insured credit union "fails" (usually forced by actions of the federal regulator NCUA)) due to management problems, corruption, violation of law or regulations, etc. - BUT, after all the dust settles, there may be funds left over. In other words, the "failed" credit union did not "fail" because it was in serious financial trouble.

What was the name of that credit union? if I know the name, I may be able to figure out what happened.
Wakefield1
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Re: free money from NCUA 6years after CU failure?

Post by Wakefield1 »

Returned interest that didn't get paid as due at the time? (or) Interest paid on funds not available during time between failure of the original c.u. and the successor picking up the obligations?
Otherwise sounds like a mistake
megabad
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Re: free money from NCUA 6years after CU failure?

Post by megabad »

This is suspiciously close to the most recent NCUA dividend so it might also be tied to that. no clue though.
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dm200
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Re: free money from NCUA 6years after CU failure?

Post by dm200 »

megabad wrote: Tue Aug 20, 2019 4:30 pm This is suspiciously close to the most recent NCUA dividend so it might also be tied to that. no clue though.
If the OP will either post the name of the credit union or PM me, I can try to research it.
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shawn_lad
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Re: free money from NCUA 6years after CU failure?

Post by shawn_lad »

Wakefield1 wrote: Tue Aug 20, 2019 1:29 pm Returned interest that didn't get paid as due at the time? (or) Interest paid on funds not available during time between failure of the original c.u. and the successor picking up the obligations?
No, I make sure I get all my interest correctly in full when CDs close up. There would have been no other interest due to me. My main saving account had almost nothing in it, so a few cents of interest that might have been lost in transition would not amount to ~$1,500
dm200 wrote: Tue Aug 20, 2019 4:39 pm If the OP will either post the name of the credit union or PM me, I can try to research it.
I did PM you ;-)
Northern Flicker
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Re: free money from NCUA 6years after CU failure?

Post by Northern Flicker »

shawn_lad wrote: Tue Aug 20, 2019 9:40 am I just got a check for ~$1500 from NCUA with a letter saying that I was a member in a credit union that failed back in 2013 and now that they finished "winding down CU affairs", there are remaining funds of which they are giving me a part. They said it will be treated a taxable dividend (with 1099-INT form at year end).

At the time of failure another CU took over and all of my accounts (including ~200k in CDs) just transferred over to the new CU without me doing anything. So, I did not lose anything and it was almost a non-event for me at the time.

Curious: is this "normal" for when Credit Union's fail?
credit unions have equity that is owned by the members rather than stockholders. If their net worth ratio were 5% (very low and consistent with a credit union in financial trouble) and they had $100M in assets, that would mean there would be about $5M to divvy up among the members after liquidation, as an example.
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dm200
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Re: free money from NCUA 6years after CU failure?

Post by dm200 »

shawn_lad wrote: Tue Aug 20, 2019 5:08 pm
Wakefield1 wrote: Tue Aug 20, 2019 1:29 pm Returned interest that didn't get paid as due at the time? (or) Interest paid on funds not available during time between failure of the original c.u. and the successor picking up the obligations?
I did PM you ;-)
OK - I saw it and will do some investigating later in the week.
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dm200
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Re: free money from NCUA 6years after CU failure?

Post by dm200 »

Northern Flicker wrote: Tue Aug 20, 2019 5:17 pm
shawn_lad wrote: Tue Aug 20, 2019 9:40 am I just got a check for ~$1500 from NCUA with a letter saying that I was a member in a credit union that failed back in 2013 and now that they finished "winding down CU affairs", there are remaining funds of which they are giving me a part. They said it will be treated a taxable dividend (with 1099-INT form at year end).
At the time of failure another CU took over and all of my accounts (including ~200k in CDs) just transferred over to the new CU without me doing anything. So, I did not lose anything and it was almost a non-event for me at the time.
Curious: is this "normal" for when Credit Union's fail?
credit unions have equity that is owned by the members rather than stockholders. If their net worth ratio were 5% (very low and consistent with a credit union in financial trouble) and they had $100M in assets, that would mean there would be about $5M to divvy up among the members after liquidation, as an example.
Yes - very true - as long as the credit union is still "in operation". What puzzles me about this is that, in all cases I am familiar with, when there is a merger or acquisition, the continuing entity owns that equity or net worth.

Maybe this was handled differently OR I just did not understand the accounting.
Northern Flicker
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Re: free money from NCUA 6years after CU failure?

Post by Northern Flicker »

Yes. I don’t know the particular situation. I was just describing a hypothetical situation of what a liquidation of a credit union with a 5% net worth ratio might look like.
not4me
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Re: free money from NCUA 6years after CU failure?

Post by not4me »

dm200 wrote: Tue Aug 20, 2019 5:33 pm
shawn_lad wrote: Tue Aug 20, 2019 5:08 pm
Wakefield1 wrote: Tue Aug 20, 2019 1:29 pm Returned interest that didn't get paid as due at the time? (or) Interest paid on funds not available during time between failure of the original c.u. and the successor picking up the obligations?
I did PM you ;-)
OK - I saw it and will do some investigating later in the week.
I don't know the facts in this case at all & realize insight may be forthcoming. I did hear recently of a situation that wasn't a credit union, but it turns out the organization had a flawed process in pricing/calculating their interest. It wasn't fraud, but rather an undetected hole in their logic/process/whatever. A class action suit ended up with a re-calculation...they went back to those who owned at the time & gave extra $s, and ate the loss when they had paid too much.

Throw that in in case dm200 doesn't find anything
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shawn_lad
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Re: free money from NCUA 6years after CU failure?

Post by shawn_lad »

not4me wrote: Wed Aug 21, 2019 11:59 am I don't know the facts in this case at all & realize insight may be forthcoming. I did hear recently of a situation that wasn't a credit union, but it turns out the organization had a flawed process in pricing/calculating their interest. It wasn't fraud, but rather an undetected hole in their logic/process/whatever. A class action suit ended up with a re-calculation...they went back to those who owned at the time & gave extra $s, and ate the loss when they had paid too much.

Throw that in in case dm200 doesn't find anything
It's a good theory but not the case here. Not only because this was not mentioned by the NCUA letter, but mostly because I am very meticulous in verifying the I get the right interest from the institutions on all my CDs. I have my own spreadsheet which calculates interest that I SHOULD get and I verify that I get it whenever CDs close. In this case, they actually DID make a mistake in 2012 if I recall correctly because they did not include interest for Feb 29 of that year. I called and they corrected it for me. In either case, none of this would come close to ~$1500 of a barely noticeable interest mistake.
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dm200
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Re: free money from NCUA 6years after CU failure?

Post by dm200 »

It's a good theory but not the case here. Not only because this was not mentioned by the NCUA letter, but mostly because I am very meticulous in verifying the I get the right interest from the institutions on all my CDs. I have my own spreadsheet which calculates interest that I SHOULD get and I verify that I get it whenever CDs close. In this case, they actually DID make a mistake in 2012 if I recall correctly because they did not include interest for Feb 29 of that year. I called and they corrected it for me. In either case, none of this would come close to ~$1500 of a barely noticeable interest mistake.
Good for you! I am noticing that so many folks in banks and credit unions assume that the computerized interest and dividend calculations are correct - when, in fact, there can certainly be errors.

if there were more folks who correctly can do the calculations - and bring any errors to the proper officials or government regulators - almost everyone would be better off. [Except for those making the errors, especially if part of fraud.]
bberris
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Re: free money from NCUA 6years after CU failure?

Post by bberris »

A bank or CU can be solvent in one sense (assets are more than liabilities) yet still fail because they are unable to pay their liabilities (including deposits) when demanded or due. I'm guessing that they had repossessed assets that could not be liquidated fast enough, and probably had a run on deposits. After six years, they got the job done and are now distributing what was left. As a credit union member, you are an owner of the credit union. Also if you are a depositor of a mutual savings bank, you are an owner.

Mutual savings bank conversions can be very good investments and if you luck into one, I would take a flyer and buy.
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dm200
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Re: free money from NCUA 6years after CU failure?

Post by dm200 »

Still a "mystery" to me. I have some other places to research and the OP messaged me with some other details.

I know there are several ways that NCUA handles "failed" credit unions - sometimes regular merger with a healthy credit union, sometimes NCUA provides financial and other "assistance" for the failed credit union to merge (assistance to the healthy credit union), and sometimes the failed credit union is liquidated - with some (or all) accounts (savings and loans) being acquired by a healthy credit union. To members of the failed credit union, these different ways that NCUA handled the details look the same.

One thing the OP might do is make an inquiry about the details to NCUA. The risk, though, of doing that is that this is a mistake and NCUA takes back the money :(

Stay tuned!!
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shawn_lad
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Re: free money from NCUA 6years after CU failure?

Post by shawn_lad »

dm200 wrote: Fri Aug 23, 2019 9:14 am One thing the OP might do is make an inquiry about the details to NCUA. The risk, though, of doing that is that this is a mistake and NCUA takes back the money :(
I was a little curious, but not to that extent; sometimes...

Ignorance is bliss :sharebeer
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dm200
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Re: free money from NCUA 6years after CU failure?

Post by dm200 »

I have one more idea to research - but I cannot find anything that explains this situation. One guess is that it has something to do with the refund NCUA is giving credit unions for past assessments when the financial crisis hit over ten years ago.
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