Michael McGrath, the former CEO of CU National Mortgage, was sentenced to 14 years in prison today for his part in a scheme which saw some credit union mortgages fraudulently sold on the secondary market.
In addition to the 14 years, McGrath was sentenced to three years of supervised probation and an unspecified amount of financial restitution. A date for the financial restitution has not yet been set, according to the office of the U.S. Attorney for New Jersey.
McGrath pleaded guilty yesterday to mail and wire fraud and money laundering charges in connection with a $139 million mortgage fraud scheme.
According to an FBI release, McGrath admitted in court he "conspired with several others" over a five-year period to fraudulently sell credit union loans, using the proceeds to address cash flow problems created by losses on investments in mortgage-backed securities.
At first, McGrath began pilfering funds from credit union mortgages authorized to be sold to Fannie Mae. However, as U.S. Mortgage's financial condition continued to deteriorate, McGrath admitted to selling hundreds of mortgage loans to Fannie Mae without the knowledge and consent of owning credit unions.