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Washington
Judge could decide CU claims against Fannie Mae
WASHINGTON (2/3/11)--A potential ruling in a credit union suit brought against Fannie Mae could come within the next few months after the government-sponsored mortgage giant and a credit union each this week filed briefs regarding possible summary judgment. The credit union which filed the brief is New Jersey-based Picatinny FCU. Three other credit unions, New York-based Suffolk FCU and Sperry Associates FCU, and Proponent FCU, also of New Jersey, are involved in related litigation against Fannie Mae for up to $60 million in damages. The Picatinny FCU case alone involves over $14 million in disputed mortgage notes. The credit unions have alleged that Fannie Mae became responsible for these damages when it purchased bundled credit union mortgages from the now defunct U.S. Mortgage Corp. Michael J. McGrath, the former president/CEO of U.S. Mortgage who pleaded guilty last year to the fraud of $139.6 million from 28 credit unions, Fannie Mae, and others, sold the mortgages to Fannie Mae on behalf of these and other credit unions. McGrath was not authorized to perform such transactions on behalf of the credit unions. The fraudulent transactions took place between 2004 and 2009. McGrath’s former company, U.S. Mortgage, and its subsidiary Credit Union National Mortgage listed over $200 million in debts to Fannie Mae and 28 credit unions when they filed for bankruptcy in early 2009. Each side has alleged that the other did not properly screen McGrath before the mortgage transactions were made. While a recent Picatinny FCU filing claims that Fannie Mae failed to follow its own loan certification standards when it purchased loans from McGrath, Fannie Mae has alleged that the credit unions should have warned Fannie Mae that McGrath was acting without credit union authority. Fannie Mae and Picatinny FCU are each seeking a full judgment in their favor, but the case could go to trial. That case and the other three credit unions’ cases against Fannie Mae are pending in the U.S. District Court for the District of New Jersey.


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