Some Credit Unions Are Seeing Movement On US Mortgage Corp. Losses
Some of the more than 20 credit unions that suffered losses when a vendor executive fraudulently sold mortgages written to Fannie Mae have made progress in getting at least some of their money and mortgages back.
According to sources who spoke requesting anonymity, citing a confidentiality agreement, Fannie Mae, CUNA Mutual Insurance and the ad-hoc committee of 17 credit unions that formed to address the issue met in New York City over May 5-7. The parties each contributed to the cost of hiring a mediator and agreed on a mediation firm to help them handle their disagreements surrounding the issue.
The disputes arose after credit unions that had used the services of CU National Mortgage, a subsidiary of US Mortgage Corp., found that US Mortgage CEO Michael McGrath had essentially stolen the mortgages the firm was supposed to service and sold them to Fannie Mae. McGrath confessed to the fraud and is awaiting a possibly lengthy sentence from a federal court in July. The credit unions have set out to try to recover the more than $139 million that was sold fraudulently to Fannie Mae.
The effort to recoup their losses became more complicated when Fannie Mae refused to return the mortgages and after a dispute arose with CUNA Mutual about whether and how the mortgage theft was covered by insurance.
Seventeen of the credit unions with smaller claims in the matter, representing eight states and the District of Columbia, banded together in the ad-hoc committee to try to draw media attention to their plight and get help from regulators and legislators. That part of the effort has been useful, sources said, citing letters from the NCUA and other regulators as well as state legislative delegations for having helped spur Fannie Mae to come to the meeting.
The four credit unions with the largest damages, according to bankruptcy court filings, did not join with the ad-hoc committee but have instead approached Fannie Mae and CUNA Mutual on their own. None would speak for the record, but two expressed confidence that the negotiations are moving forward.
None of the credit unions involved would speak to the specifics of their settlements, but several reported reaching agreements with both Fannie Mae and Freddie Mac, often the credit unions with the smaller amounts at stake.
CUNA Mutual as well would not speak to the specifics of any deal because of the confidentially but also expressed confidence in the process so far. ""We're hopeful the recent settlements will be helpful in resolving the remaining matters," a spokesman for CUNA Mutual said. "We're pleased that we're making progress in resolving this situation in a manner that's fair for everyone."