When the Southfield-based mortgage firm MCA Financial Corporation announced that it would close its 40 branch offices and lay off 900 workers last week, homeowners were not the only ones to worry about the fallout. Detroit’s Policemen and Firemen Retirement System Board raised the same concern at its weekly meeting last Thursday.
"The total amount of the System’s loans to MCA are approximately $59,200,000," according to a statement the board issued January 28. "MCA has recently defaulted under its agreements with the Retirement System."
The board added that prior to the default, MCA Financial Corporation paid the pension fund approximately $11,800,000 in interest and other payments. The loans, minus the payments made, "represent less than one-and-one-half percent of the $3.67 billion dollars in assets of the system."
The board statement also says the Policemen and Firemen Retirement System is "one of the most financially sound public employee pension funds in the country by virtue of the fact that the system is funded well in excess of 100 percent. In the event that there are any losses on its loans to MCA, the system will remain funded in excess of 100 percent and will continue to be one of the best-funded systems in the country."
Nick Degel, Policemen and Firemen Retirement Systems administrative assistant, said the board did not want to comment on the defaulted loan beyond what is contained in the written statement.
MCA Financial Corporation officers could not be reached for comment.
Detroit City Council President Gil Hill, who sits on the pension board, said he did not want to comment on the defaulted loans. However, he did prepare a written statement to City Council members, which says that "on January 28, 1999, the Michigan Financial Institution Bureau (FIB) issued and entered an order appointing a conservator over the MCA Financial Corporation. This action was taken when the (FIB) determined that MCA had lost its mortgage warehousing line of credit effectively eliminating MCA’s ability to do business."
MCA specialized in providing mortgages to high-risk clients with poor credit histories.
According to an FIB document, MCA Financial Corporation "closed approximately 190 loans across the country for which no funding source exists. Over 80 of these loans are on Michigan properties."
Hill’s statement advises area residents holding MCA mortgages to "continue to make their payment as they have in the past as the (FIB), through the conservator, will be processing the payments."