Michael J. McGrath, Jr., former president of U.S. Mortgage and CU National Mortgage, 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.
"This was truly a massive fraud, a giant shell game by McGrath," said acting U.S. Attorney Ralph J. Marra, Jr. "McGrath deftly and fraudulently moved these mortgage assets around and sold them while the institutional owners had no idea they no longer held the assets. The goal was to prop up his own company, which instead sunk deeper into trouble as his scheme grew larger and ultimately collapsed."
Under his plea agreement, McGrath faces sentencing up to 20 years in federal prison, scheduled for Oct. 1. He was released on a $1 million bond and ordered to electronically monitored home confinement until sentencing.
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