Michael McGrath, the disgraced former president of U.S. Mortgage Corp. and its CU National Mortgage unit, was sentenced late Thursday to 14 years behind bars for a massive fraud in which he sold $140 million of CU mortgages his company was servicing to Fannie Mae and kept the proceeds.
His scam hammered the balance sheets of 28 credit unions as he gambled away all of the proceeds in a falling stock market, leaving an estimated $125 million of losses for those institutions.
Over the past two years the CUs have been fighting Fannie Mae and its insurers for recompense.
McGrath told federal prosecutors in Newark that he used proceeds from the fraud to keep his faltering Pine Brook, N.J., mortgage company afloat – and at one point he even bought 1 million shares of Fannie stock, just as the GSE's fortunes began to unravel in 2008.
U.S. Mortgage filed for bankruptcy in February 2009 and was liquidated over the ensuing months.
In Newark, N.J., McGrath, 48, pled guilty to one count of mail and wire fraud conspiracy, and one count of money laundering conspiracy.
Despite evidence that he received assistance in carrying out the fraud, only one other figure has been charged in the scheme: Leroy Hayden, the former servicing manager of the mortgage company. Hayden pleaded guilty last year to charges of conspiracy in the case.
