NEWARK, N.J. – A federal court has rescheduled next week’s sentencing for U.S. Mortgage President Michael McGrath in the $140 million fraud at CU National Mortgage until April, when the one-time mortgage executive is expected to be given a long prison sentence.
Prosecutors and McGrath have agreed to a sentence of 12 years to 20 years in prison, according to sources familiar with the case. The sentence must be accepted by the judge.
Meantime, two more of the 28 credit unions defrauded in the scheme, TCT FCU in Ballston Spa, N.Y., and Velocity Community CU in Palm Beach Gardens, Fla., have settled their claims with Fannie Mae, which bought their mortgages from McGrath under false pretenses. That makes at least three credit unions that have settled with Fannie, as they join Educational Systems FCU in Maryland.
But several other credit unions – some with large claims – are vowing to continue to contest the ownership of their mortgages with Fannie Mae. “We will not be getting out that cheap,” James Forte, a New Jersey attorney representing Picatinny FCU in Dover, N.J., told Credit Union Journal yesterday. Picatinny claims that Fannie Mae owes it more than $14 million from the sale of mortgages CU National held on its behalf to Fannie Mae and has filed suit over the claim.
Several of the credit union victims, including TCT and Educational Systems, are suing CUNA Mutual Group, which they hope will make up the difference between their total losses and a settlement with Fannie Mae through an insurance claim. CUNA Mutual has filed its own suit against 23 of the credit unions seeking a declaratory judgment that it is not responsible for losses related to the massive fraud.
McGrath last June pleaded guilty to selling as much as $140 million of credit union mortgages to Fannie Mae without the credit unions’ authorization and keeping the money. Under his plea agreement, McGrath has agreed to forfeit about $13 million in assets. He apparently lost the remaining funds in the stock market, leaving as much as $125 million of credit unions funds missing.
At least two more executives in the company, an accountant and the head of servicing, also are expected to plead guilty in the coming days to being accomplices to the fraud.
