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CU System
Sentencing of U.S. Mortgages McGrath delayed to May
NEWARK, N.J. (3/22/10)--A U.S. District Court in New Jersey has again postponed the sentencing date of Michael McGrath, president of the former U.S. Mortgage/Credit Union National Mortgage company, for the fraud of nearly $140 million from credit unions and Fannie Mae. The sentencing date is reset for 10 a.m. ET on May 18 before Judge Katherine S. Hayden, according to the criminal docket for the case. At that time Hayden will determine whether to accept the recommendation for 12 1/2 to 20 years in prison made in a plea bargain. McGrath also is to pay restitution (News Now Jan. 11). McGrath pleaded guilty in June to one count of mail and wire fraud and one count of money laundering conspiracy in defrauding $139.6 million from 28 credit unions, Fannie Mae and others (News Now June 12). McGrath admitted to conspiring with others from January 2004 to January 2009 to fraudulently sell credit union loans and use the proceeds to finance U.S. Mortgage's operations and investments for himself and his company. He also admitted to diverting funds that should have been paid to credit unions for mortgage loans sold without authorization to Fannie Mae to help offset bad investments in mortgage-backed securities, according to prosecutors (Reuters June 11). Both U.S. Mortgage and Credit Union National Mortgage, which were based in Pine Brook, N.J., filed for Chapter 11 bankruptcy during February 2009 in Newark. They listed more than $200 million in debts to Fannie Mae and the 28 credit unions. The bankruptcies have led to several lawsuits by credit unions seeking to recoup losses against Fannie Mae and against insurance companies. McGrath pleaded guilty in June. Since then five sentencing dates have been set and postponed: Oct. 1, 2009; Nov. 30, 2009; Feb. 1; March 22; and April 19. On Thursday the court reset the date for May 18.


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