Fannie Mae has agreed to settle multimillion-dollar claims brought by several of the biggest victims of the massive CU National Mortgage scandal, more than two years after the fraud brought down the largest independent mortgage wholesale provider to credit unions.
Fannie agreed to settle claims brought by Suffolk Federal Credit Union in New York, Picatinny Federal Credit Union in New Jersey and Treasury Employees Federal Credit Union in Washington, which claimed more than $62 million of their mortgages were improperly sold to Fannie as part of a $140 million fraud perpetrated by Michael McGrath, president of U.S. Mortgage Corp. and its wholly owned CU National Mortgage subsidiary.
McGrath is serving a 14-year prison term after pleading guilty to the fraud.
Lawyers for the credit unions declined to comment, but sources with knowledge of the settlements say the combination of the Fannie payments and insurance money will reimburse the victim credit unions for more than 90% of their original claims.
The settlements leave two remaining credit unions out of an original 28 fraud victims with outstanding claims against Fannie: Proponent Federal Credit Union in New Jersey, which is still grappling in court with Fannie over a $21.6 million claim, and Sperry Associates Federal Credit Union in New York, which had a $9.2 million claim. Lawsuits filed by the two credit unions are proceeding in federal court.
