The former president of New Jersey-based U.S. Mortgage Corp. has been sentenced to 14 years in prison for his role in a $136 million fraud scheme that bankrupted the company and its subsidiary, CU National Mortgage, prosecutors said.

The former president of New Jersey-based U.S. Mortgage Corp. has been sentenced to 14 years in prison for his role in a $136 million fraud scheme that bankrupted the company and its subsidiary, CU National Mortgage, prosecutors said.

Michael J. McGrath, Jr., 47, pleaded guilty last year to one count of mail and wire fraud conspiracy and one count of money laundering in connection with a scheme to fraudulently sell Fannie Mae hundreds of loans belonging to various credit unions from 2002 to early 2009.

Other members of the conspiracy included U.S. Mortgage’s chief financial officer and its servicing manager, Leroy Hayden, of East Stroudsburg, Pa.. Hayden, 47, has pleaded guilty to one count of wire fraud conspiracy and is currently scheduled to be sentenced on March 24.

Prosecutors said that at McGrath’s direction, Hayden provided numerous reports to credit unions falsely stating that loans that had been sold were still in the credit unions’ portfolios.

McGrath admitted that he devised the scheme to prop up U.S. Mortgage, and that he used the proceeds to fund U.S. Mortgage’s operations, his personal investments, and investments he made on U.S. Mortgage’s behalf, prosecutors said.

Prosecutors said they expect McGrath will also be ordered to pay more than $136 million in restitution. A restitution order was postponed in order to allocate victims’ losses.

U.S. Mortgage and CU National filed for bankruptcy and hundreds of employees lost their jobs after law enforcement officers executed a search warrant at the companies’ Pine Brook headquarters in January 2009, prosecutors said.

Four credit unions have filed civil suits against Fannie Mae seeking to recover more than $64 million in loans they say were fraudulently sold by U.S. Mortgage, Reuters reported.

Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Hear from Realogy, Pacaso, SERHANT., Spotify, Redfin, Douglas Elliman, and 100+ more leaders at ICNY.Register now×
Limited time: Get 30 days of Inman Select for $5.SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription