Michael J. McGrath, Jr., former president of U.S. Mortgage andCU National Mortgage, pleaded guilty yesterday to mail and wirefraud and money laundering charges in connection with a $139million mortgage fraud scheme.

According to an FBI release, McGrath admitted in court he"conspired with several others" over a five-year period tofraudulently sell credit union loans, using the proceeds to addresscash flow problems created by losses on investments inmortgage-backed securities.

At first, McGrath began pilfering funds from credit unionmortgages authorized to be sold to Fannie Mae. However, as U.S.Mortgage's financial condition continued to deteriorate, McGrathadmitted to selling hundreds of mortgage loans to Fannie Maewithout the knowledge and consent of owning credit unions.

"This was truly a massive fraud, a giant shell game by McGrath,"said acting U.S. Attorney Ralph J. Marra, Jr. "McGrath deftly andfraudulently moved these mortgage assets around and sold them whilethe institutional owners had no idea they no longer held theassets. The goal was to prop up his own company, which instead sunkdeeper into trouble as his scheme grew larger and ultimatelycollapsed."

Under his plea agreement, McGrath faces sentencing up to 20years in federal prison, scheduled for Oct. 1. He was released on a$1 million bond and ordered to electronically monitored homeconfinement until sentencing.