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News Now

CU System
McGrath gets 14 years in CU National Mortgage scam
NEWARK, N.J. (2/25/11)--The New Jersey man at the center of the fraudulent mortgage loans that defrauded nearly $140 million from 28 credit unions, Fannie Mae and others was sentenced to 14 years in prison Thursday by U.S. District Judge Katharine Hayden in Newark (Reuters Feb. 24). Michael McGrath, 47, of Pinebrook, N.J., was president of the U.S. Mortgage Corp. and a principal of its subsidiary, Credit Union National Mortgage Co. Both companies filed for a Chapter 11 bankruptcy during February 2009 in Newark. McGrath admitted to conspiring with others from January 2004 to January 2009 to fraudulently sell credit union loans and use the proceeds to finance his company's operations and investments for himself. He also admitted diverting the funds that should have been paid to credit unions on mortgage loans he sold to Fannie Mae to pay for bad investments (News Now Aug. 12, 2010). McGrath pleaded guilty in June 2009 to two counts of conspiracy, including one to commit mail and wire fraud and one to commit money laundering, stemming from the scheme. He faced up to 30 years in prison under federal guidelines but his plea bargain called for a prison term as short as 12 and a half years. His lawyer told Reuters McGrath helped recover $13 million of the losses. The fraud sparked a number of lawsuits against Fannie Mae and insurance companies by credit unions seeking to recoup some of the losses. Four credit unions are still pursuing civil litigation against Fannie Mae.


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