NEWARK, N.J. – CU National Mortgage agreed yesterday to return millions of dollars in loans to Picatinny FCU as a result of negotiations related to the bankruptcy filing of the company’s corporate parent, US Mortgage Corp. and the alleged fraud involving to tens of millions of dollars of credit union loans.
"We’ve reached a resolution with the debtor, subject to bankruptcy court approval, on the servicing rights," said James Forte, a Newark lawyer representing the $220 million Dover, N.J., credit union.
Still at issue is as much as $115 million of credit union mortgages CU National sold to Fannie Mae without authorization, which as many as 20 mid-Atlantic states credit union are trying to have the secondary mortgage market giant return.
Picatinny has also filed suit against Fannie Mae in state court to compel the return of the mortgages.
"We’re in discussions about those," Forte told The Credit Union Journal yesterday, after a hearing before the bankruptcy court. As many as 58 Picatinny mortgages worth more than $14 million were sold by CU National to Fannie Mae.
The bankruptcy court also agreed yesterday on cash management controls aimed at preserving CU National funds that might be dissipated in a long, drawn-out bankruptcy case. The credit unions are worried that CU National has failed to pay property taxes, insurance and other escrow payments on member loans the company had contracted for under servicing agreements. Among them are: Suffolk FCU, Treasury Department FCU, Novartis FCU, Educational Systems FCU, County Educators FCU, Energy FCU, Rutgers FCU, Piedmont Aviation CU, Pinnacle FCU, Lassen County FCU, British Airways Employees FCU, Diablo Valley FCU, ADP FCU, United Financial Services FCU, Delaware First FCU, Jersey Trades FCU and Frontier Financial FCU.
The FBI and credit union regulators are investigating the alleged fraud at CU National, which provided mortgage services for more than 120 credit unions. FBI agents raided the company’s office on January 27 and carted off boxes of documents.
