NEWARK, N.J. – Even as U.S. Mortgage Owner Michael McGrath was pleading guilty to the unauthorized sale of $140 million in credit union mortgages to Fannie Mae, the government-controlled mortgage giant was refusing to give the mortgages back to the aggrieved credit unions.
In papers filed with a federal court here last week, Fannie Mae insisted it had no proof that McGrath was not an assistant vice president of Picatinny FCU when McGrath signed over millions of dollars in the credit union’s mortgages sold through U.S. Mortgage’s CU National Mortgage subsidiary. "Fannie Mae denies that any notes and mortgages sold through CU National or U.S. Mortgage to Fannie Mae were sold without Picatinny’s authorization," said the mortgage company in response to a suit by the Dover, N.J., credit union seeking return of 52 loans worth $13.2 million sold to Fannie by McGrath.
"Fannie Mae is without knowledge or information sufficient to form a belief as to whether McGrath was ever an Assistant (or Acting) Vice President of Picatinny and, therefore, Fannie Mae denies the allegation that he was at no time an Assistant Vice President of Picatinny," the mortgage giant asserted in the court filing.
In its suit, Picatinny refers to a Feb. 13 letter from U.S. Mortgage’s General Counsel Andrew Liput that acknowledges McGrath’s fraud. "At this point in our investigation we believe that 40 loans were sold without authorization," said the U.S. Mortgage executive.
Almost 30 credit unions are claiming that McGrath posed as one of their executives and sold their mortgages to Fannie without their knowledge and pocketed the funds. David Stein, a New Jersey lawyer representing unsecured creditors in U.S. Mortgage’s bankruptcy case, said they are negotiating with Fannie for return of the mortgages but have met with resistance so far.
McGrath, 46, pleaded guilty last week to fraud charges in the case and has agreed to forfeit $13 million worth of assets. But this still leaves more than $125 million of credit union funds unaccounted for.
James Forte, Picatinny’s lawyer, said he found Fannie Mae’s argument that it did not know McGrath was not an executive of the credit unions doubtful and said they will proceed to discovery in their case.
