NEWARK, N.J. – The former servicing manager of U.S. Mortgage Corp/CU National Mortgage on Thursday pleaded guilty to conspiring to defraud credit unions and Fannie Mae in the $140 million mortgage scandal.
Leroy Hayden, 47, was convicted of conspiracy to assist U.S. Mortgage/CU National president Michael McGrath in his scheme to fraudulently sell Fannie Mae mortgages that the company was servicing on behalf of credit unions.
“Frauds of this magnitude don’t happen without someone to cook the books and push the paper,” said U.S. Attorney Paul Fishman. “Leroy Hayden had to decide whether to go along with his boss’ fraud or alert law enforcement to the scheme. Unfortunately, he made the criminal choice.”
Hayden told authorities he provided numerous reports to credit unions falsely stating that loans that had been sold were still in the credit unions’ portfolios, and falsified records, at McGrath’s direction, to conceal these fraudulent sales.
Hayden also admitted that he modified data in U.S. Mortgage’s servicing system to help carry out the scheme.
As many as 28 credit unions in the Mid-Atlantic States stand to lose as much as $125 million in the case and are frantically negotiating with Fannie Mae for the return of their mortgages. Several of the credit unions also are in litigation with their insurer, CUNA Mutual Group’s CUMIS Insurance Society, over coverage of the fraud.
McGrath, who pleaded guilty last June and is scheduled to be sentenced in July, told authorities he kept the credit unions’ money and gambled it away in the stock market as the market was plunging. He has agreed to forfeit about $15 million in assets, leaving a $125 million hold from the fraud.
At least one other participant is the fraud is expected to plead guilty to criminal charges, according to sources.
