Sentencing Delayed In $140 Million CU National Mortgage Fraud

A federal court in Newark has rescheduled next week's sentencing for U.S. Mortgage President Michael McGrath in the $140 million fraud at CU National Mortgage until April, when the one-time mortgage executive is expected to be given a long prison sentence. Prosecutors and McGrath have agreed to a sentence of 12 to 20 years in prison, according to sources familiar with the case. The sentence must be accepted by the judge. Meantime, two more of the 28 credit unions defrauded in the scheme, TCT FCU in Ballston Spa, N.Y., and Velocity Community CU of Palm Beach Gardens, Fla., have settled their claims with Fannie Mae, which bought their mortgages from McGrath under false pretenses. That makes at least three credit unions that have settled with Fannie, as they join Educational Systems FCU in Maryland. But several other credit unions, some with large claims, are vowing to continue to contest the ownership of their mortgages and of money with Fannie Mae. McGrath pleaded guilty last June to selling as much as $140 million of credit union mortgages to Fannie Mae without the credit unions' authorization and keeping the money. Under his plea agreement, McGrath has agreed to forfeit about $13 million in assets. He apparently lost the remaining funds in the stock market, leaving as much as $125 million of credit unions funds missing. At least two more executives in the company, an accountant and the head of servicing, are also expected to plead guilty in the coming days to being accomplices to the fraud.