Feds Eyes More Guilty Pleas in CU Fraud Case

Federal prosecutors in Newark are negotiating guilty pleas with at least three more executives of U.S. Mortgage/CU National Mortgage in the fraudulent sale of $140 million of credit union mortgages to Fannie Mae, according to sources close to the case. Court records in last week's guilty plea by Leroy Hayden, the former servicing manager at U.S. Mortgage, name three other co-conspirators who have yet to be charged in the case. Sentencing for Michael McGrath, the company's president who allegedly masterminded the huge fraud, has been delayed until July while other suspects negotiate guilty pleas, several sources told The Credit Union Journal. Hayden told authorities that he provided reports to credit unions falsely stating that loans that had been sold were still in the credit unions' portfolios. He also allegedly falsified records, at McGrath's direction, to conceal these fraudulent sales. Hayden also admitted that he modified data in U.S. Mortgage's servicing system to help carry out the scheme. As many as 28 CUs in the mid Atlantic stand to lose as much as $125 million in the case and are frantically negotiating with Fannie Mae for the return of their mortgages. CUJ is an affiliate of National Mortgage News.