NEWARK, N.J. — A federal grand jury is investigating whether the owners of CU National Mortgage illegally transferred mortgages owned by the company's CU customers to Fannie Mae, siphoning off millions of dollars in the process.
Criminal charges are expected to be filed in the case within the next few weeks by the U.S. Attorney for the District of New Jersey, which has impaneled the grand jury, several sources have told Credit Union Journal.
CU National and its corporate parent U.S. Mortgage Corp., filed for bankruptcy two weeks ago amid claims by the credit unions, which allege the company fraudulently transferred more than $115 million of their loans to Fannie Mae. Among the allegations are that Michael McGrath, owner of the privately held company, signed documents transferring the mortgages alleging to be an officer of at least one of the credit unions.
Lawyers for McGrath did not return phone calls seeking comment.
The U.S. Treasury, IRS, U.S. Postal Service, NCUA and several state banking agencies are also participating in the probe, which culminated in a January 26 raid on the company's Pine Brook, N.J., offices, when federal agents carted off dozens of boxes of CU National's records.
Among the credit unions alleging wrongdoing are: Picatinny FCU, 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.
Meantime, CU National agreed last week to return millions of dollars in loans to Picatinny FCU.
"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 said, 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.
A Fannie Mae spokesman declined to comment last week.
