NEWARK, N.J. – A federal court last week agreed to consolidate suits brought by three credit unions asking for the return of more than $35 million of mortgages fraudulently sold to Fannie Mae by U.S. Mortgage/CU National Mortgage.
While several smaller credit unions have settled claims, the three – Picatinny FCU, Proponent FCU and Sperry Associates FCU – are among the biggest victims in the fraud in which CU National sold almost $140 million of mortgages owned by 28 credit unions to Fannie Mae without their knowledge and kept the funds.
In is order, U.S. Judge Garrett Brown ruled that the consolidation of the cases is in the best interests of the credit unions.
Meantime, two more former executives of the now-defunct mortgage company are preparing to plead guilty in the massive fraud. Michael McGrath, president of U.S. Mortgage and of its wholly owned CU National Mortgage subsidiary, has pleaded guilty in the case and next month is expected to be sentenced to up to 20 years behind bars.
The fraud has created a tangle of legal claims, with several of the credit union victims suing CUNA Mutual Group to ensure coverage of any losses they end up with, and CUNA Mutual suing the credit unions for a declaratory judgment that it is not liable for the coverage.
