Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive

News Now

CU System
Judge approves U.S. Mortgage Corp. settlement with underwriters
NEWARK, N.J. (11/4/11)--A U.S. District Court in Newark, N.J., approved a consent judgment against CU National Mortgage LLC and U.S. Mortgage Corp., and in favor of the companies' insurance underwriters, settling a case stemming from nearly $140 million in fraudulent mortgage loans that caused losses to 28 credit unions.

U.S. District Judge Jose L. Linares signed the consent judgment Thursday, according to court documents. It voids U.S. Mortgage's and CU National's insurance policies with Certain Underwriters at Lloyd's, London, which sued Michael J. McGrath Jr., John Kuskin, and the two former mortgage corporations. Default judgments had been entered previously against the two men.

McGrath, who was president of the former mortgage companies, pleaded guilty in 2009 to stealing $139.6 million from credit unions, and is currently serving a 14 year sentence (News Now Aug. 31).

The case prompted a string of lawsuits led by Fannie Mae, and credit unions including Dover, N.J.-based Picatinny FCU, Medford, N.Y.-based Suffolk FCU and Garden City Park, N.Y.-based Sperry Associates FCU and Nutley, N.J.-based Proponent FCU. They and the other credit unions incurred a combined $160 million in losses after Pine Brook, N.J.-based CU National Mortgage fraudulently sold 189 mortgage loans without authorization to Fannie Mae and pocketed the funds between 2004 and 2009.

The mortgage companies listed more than $200 million in debts to Fannie Mae and 19 credit unions when they filed for Chapter 11 bankruptcy in early 2009. McGrath fraudulently conveyed the mortgages to Fannie Mae by forging allonges that he endorsed in his own name.  An allonge is an attachment to a note that a party can add on for endorsements, such as signatures for transferring the note. His endorsement also included the initials "AVP," which may have been taken to mean associate vice president.

One can make endorsements on the note itself, but McGrath allegedly used allonges instead to help hide his fraud. While CU National Mortgage's non-fraudulent transfers to Fannie Mae were made using Fannie Mae's electronic mortgage note transfer system, the fraudulent transfers were made using paper copies, with the attached allonges, according to court documents from the Fannie Mae lawsuit, which was settled in August.

RSS print
News Now LiveWire
Stay tuned for coverage of @CUNA's BSA conference which starts Sunday. #CUNABSA #CUNACompliance
15 hours ago
Today's the last day to complete @CUNA's Home Depot data breach survey #StoptheDataBreaches
16 hours ago
Brenda Davis of Cross Roads Ministries will walk through 83 communities during the Ending Hunger Walking tour. (2 of 2)
18 hours ago
The Ending Hunger Walking tour, coordinated by the Maine CU League, kicked off at Old Maine CU in Augusta today. (1 of 2)
18 hours ago
Darwin Brokke of Citizens Community CU represented the #CU Association of Dakotas at a housing summit hosted by @SenatorHeitkamp
18 hours ago