The $247 million Picatinny Federal Credit Union continued legal action over alleged fraud committed by Pine Brook, N.J.-based U.S. Mortgage Corp. and its subsidiary, CU National Mortgage.
The Dover, N.J.-based Picatinny filed a civil suit against Fannie Mae on March 9, claiming ownership of more than $14 million in disputed mortgages. The credit union claims that 58 loans were fraudulently sold to the government-sponsored enterprise by former U.S. Mortgage President/CEO Michael J. McGrath, who posed as a Picatinny vice president.
McGrath, as U.S. Mortgage president, was appointed to Fannie Mae's Customer Advisory Council in July 2007. Fannie Mae corporate spokesperson Brian Faith said McGrath is no longer associated with the group.
Picatinny attorney James Forte said Picatinny demanded that Fannie Mae transfer ownership of the loans back to the credit union, but the secondary-market entity did not act.
"We're still in discussions, and are still holding out hope that we may reach some point of resolution," Forte said.
Picatinny did settle a dispute with U.S. Mortgage's crisis management firm, NachmanHaysBrownstein, over the credit union's servicing rights and loan files. NHB was attempting to sell U.S. Mortgage's servicing rights as one big package in order to fetch a better price, said company principal Howard Brownstein. However, Picatinny refused to be included in that package, and the holdout credit union was named by Brownstein as a factor in the decision to file for bankruptcy.
"We have reached a consensual decision with the debtor, but it's still subject to bankruptcy court approval," Forte said. If the bankruptcy court approves the agreement when it convenes again March 20, the attorney said the credit union should receive its loan files back within five to seven days, at which point it will place them with a new servicer.
Forte said McGrath, who Picatinny named as a defendant in its original legal action against the mortgage provider, isn't the only U.S. Mortgage employee implicated in the scheme.
"A letter we received from their attorney acknowledges that two different sets of records were developed and used by U.S. Mortgage," he said. "One showed that the loans were still in our portfolio, while another showed them belonging to Fannie Mae."
–handerson@cutimes.com

Instant Insights /

Picatinny FCU Sues Fannie Mae To Recover CU National Loans

Related Stories

Recommended For You