In its most recent filings before the U.S. District Court for New Jersey, Fannie Mae argued that it should not have to return the loans because, while the CUs were definitely defrauded in their sale, the sale was nonetheless proper and above board from Fannie Mae's perspective.

The most recently filing in the case came from Fannie Mae in response to a motion for partial summary judgment from the $274 million Picatinny Credit Union. Picatinny is one of the four remaining CUs with ongoing litigation, having had 52 loans fraudulently sold to Fannie Mae worth over $13 million.

Fannie Mae contended that while Picatinny argued now that the sale of the loans was not authorized, their sale followed the same procedures that U.S. Mortgage had used to sell other loans to Fannie Mae in the past. Even though Picatinny argued that it had only allowed CU National to keep the original loan documents on its behalf and not U.S. Mortgage, Fannie Mae argued that in the past the credit union had relied on U.S. Mortgage, using the same procedures, to sell its loans into the secondary market.

"Regardless of whether U.S. Mortgage had actual authority to sell the disputed notes [the fraudulently sold mortgages] to Fannie Mae, it had apparent authority to do so. And apparent authority is every bit as binding on the principal as actual authority," Fannie Mae argued in its brief.

Fannie Mae also argued that Picatinny had facilitated the fraud by allowing CU National and U.S. Mortgage to hold the original mortgage documents instead of holding them itself or assigning a third party as custodian of them.

For its part, in its brief in favor of the partial summary judgment, Picatinny argued that affidavits from its current and former CEO dispute that U.S. Mortgage had the "actual authority" to endorse or sell the mortgage notes and argued that existing case law argues against Fannie Mae drawing that conclusion from even "apparent authority."