A federal court 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 and its subsidiary CU National Mortgage.
While several smaller credit unions have settled claims, the three plaintiffs — Picatinny Federal Credit Union, Proponent Federal Credit Union and Sperry Associates Federal Credit Union — 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 without their knowledge and kept the funds.
In his order last week, Judge Garrett Brown of the U.S. District Court in Newark, N.J., ruled that the consolidation of the cases is in the best interests of the credit unions.
Meanwhile, two more former executives of the now-defunct mortgage company are preparing to plead guilty in the massive fraud.
Michael McGrath, the president of U.S. Mortgage and CU National Mortgage, 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.