Credit Unions Hurt in Mortgage Fraud Lobby Congress Against Fannie Mae
Alfred Scipio, CEO of the $161 million Treasury Department FCU, is serving as chairman of the group of 16 of the 26 credit unions that charged that Fannie Mae bought stolen property when it purchased mortgages that the credit unions said had been moved out of their mortgage portfolios without their knowledge.
"It's really very simple," Scipio said "Fannie Mae is in possession of stolen property, and they should give it back."
The group has begun a round of meetings with legislators and their staffs in an attempt to bring pressure on Fannie Mae to restore $125 million in mortgage loans the credit unions say were stolen. "We know which mortgages were stolen, and Fannie Mae knows what happened to them," Scipio added.
One of the group, Picatinny Federal Credit Union, headquartered in Dover, Del., has sued Fannie Mae to recover the $9 million in mortgage loans it argued were sold fraudulently to mortgage giant.
"Between 2004 and 2009, Fannie Mae 'bought' nearly $140 million in mortgages owned by more than two dozen credit unions from its approved loan servicer and vendor, U.S. Mortgage Corp., that were fraudulently transferred from the credit unions' loan portfolios without their knowledge, consent or authorization," the credit unions stated in fact sheet they were distributing to support their claims.
"This fraud continued for five years without raising any flags at Fannie Mae-in fact, the CEO, Michael McGrath, was a Fannie Mae-approved mortgage servicing vendor and sat on Fannie Mae's customer advisory board. McGrath used his close personal relationship with Fannie Mae in the very marketing materials that lured the credit unions to do business with U.S. Mortgage's affiliate, CU National."
Fannie Mae did not return calls for comment as of press time.
Scipio suggested the credit unions had hit upon the tactic of bringing Congressional pressure on Fannie Mae after the GSE had been unresponsive to previous attempts to resolve the dispute and after the firm has accepted billions of taxpayer dollars in a bail out.
"There are 510,000 members in these credit unions that will be adversely impacted if Fannie Mae doesn't do what is right," Scipio said. "That's 510,000 taxpayers whose money Fannie Mae is using right now."
Scipio said the group was not seeking a legislative remedy to the problem. Rather, he said, it is seeking to bring the situation to the attention of lawmakers who, in turn, might bring some pressure to bear on the mortgage giant, which has effectively become an arm of the U.S. Treasury Department.
"The $125 million in mortgage loans remaining to be returned is miniscule compared to the $44.9 billion Fannie Mae has received in bailout money from taxpayers. Congress should send a message that Fannie Mae's misconduct and misuse of the taxpayer funds it has received will not be tolerated and must cease immediately."
In related news, McGrath, the original CEO at U.S. Mortgage Corp. who has plead guilty to his part in the fraud, is due to receive a sentence for his role in the fraud on Nov. 30 in U.S. District Court for New Jersey.