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CU National Mortgage files for bankruptcy
NEWARK, N.J. (3/2/09)--U.S. Mortgage Corp. and its subsidiary, CU National Mortgage, have filed for a Chapter 11 bankruptcy in the U.S. Bankruptcy Court in Newark, N.J., listing more than $200 million in debts to Fannie Mae and 19 credit unions, among others, according to court records. Among the top 20 creditors with the largest unsecured claims are 19 credit unions from New Jersey, New York, District of Columbia, Maryland, North Carolina, Florida, and California. Nearly 300 creditors are listed in the petition's accompanying papers. Fannie Mae is the largest unsecured creditor, with an estimated claim of more than $99.2 million. The credit unions' estimated claims range from more than $33.7 million to $440,000. Credit unions have filed creditors' objections, asking for denial of the mortgage servicer's cash management and wage applications related to the credit unions' mortgage loans and saying they were victims of "massive fraud" orchestrated by the mortgage company. A Dover, N.J.-based credit union, Picatinny FCU, filed its response Thursday, noting that the scope of the fraud may exceed $110 million. Its petition alleges the company sold 58 of the credit union's mortgage loans, totaling more than $14 million, to Fannie Mae without the credit union's knowledge or authorization and without paying the proceeds of the loans to the credit union. The petition includes a exhibit letter, written Feb. 12 by U.S. Mortgage, informing the credit union it had discovered "that our servicing system has been producing erroneous servicing portfolio reports to your credit union." On Feb. 9, U.S. Mortgage advised its clients it could no longer handle pipeloan loans (loans in process) and advised credit unions to retain a new servicer. U.S. Mortgage refused Picatinny's demands for its loan files and information on existing loans, court records say. The Pine Brook, N.J.,-based U.S. Mortgage was licensed to do business in 34 states, primarily in Midwest, eastern and central states. It averaged monthly originations of $19 million in 2007, compared with $119 million per month in 2003. Its bankruptcy petition was filed Feb. 23 by attorney Kenneth A. Rosen of Lowenstein Sandler PC, a Roseland, N.J., law firm.

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