NEWARK, N.J. – A federal court yesterday agreed to the forfeiture of almost $14 million in five bank accounts owned by former U.S. Mortgage Corp. President Michael McGrath, closing the legal proceedings in the $140 million fraud that bankrupted the parent of CU National Mortgage.
The newly forfeited assets bring to almost $20 million the amount raised from McGrath, who is serving a 14-year prison term for the massive fraud, in which he sold mortgages his company held for 28 credit unions to Fannie Mae without the credit unions’ consent or knowledge and used the proceeds to keep his company afloat.
The forfeited funds, combined with separate settlements with Fannie Mae and the credit unions’ insurer, CUNA Mutual Group, are expected to amount to more than 90% of the missing funds, according to several sources.
McGrath, 47, who is serving in a minimum security facility in Jessup, Ga., lost the credit union funds entrusted in him by trading mortgage backed securities at the Fannie Mae trading desk. The funds were used to prop up his foundering business but the losses kept mounting as the mortgage meltdown emerged in 2008.
McGrath will serve at least 12 years of a 14-year prison term. U.S. Mortgage and its CU National unit filed for bankruptcy in February 2009 as the Feds were closing in on the McGrath fraud.
