Regulators fight over $125M in loan fraud

The government regulators for credit unions and Fannie Mae are at odds over roughly $125 million in defrauded mortgages.

A group of 16 credit unions is ramping up a public relations and lobbying push for Fannie Mae to repay money that was caught up in a fraud.

The president of U.S. Mortgage Corp. pleaded guilty in June to fraudulently selling credit union assets to Fannie Mae. The proceeds were never given back to the original credit unions. And they remain with Fannie Mae, which has been taken over by the federal government and has received tens of billions of dollars in bailout money.

The National Credit Union Administration (NCUA), the industry’s regulator, is at odds with the Federal Housing Finance Agency (FHFA), the government conservator of Fannie Mae.

Debbie Matz, chairwoman of NCUA, wrote the acting director of FHFA in mid-November urging the agency to do more to help credit unions and resolve the dispute.

“FHFA continues to work with Fannie Mae, the National Credit Union Administration and the credit unions to resolve this issue,” Stefanie Mullin, spokeswoman for FHFA, said in a statement. “There are significant legal matters involved that require full consideration by the parties.”

The letter is posted on returntheloans.com, a website representing 16 of the credit unions that have joined forces in the advocacy effort.

Matz said that in mid-August there was an offer to settle the dispute for between $16 million and $18 million. There was a slightly higher offer in early November.

“I am concerned that Fannie Mae has not made a larger, more reasonable settlement offer,” Matz wrote. “For some of the credit unions, their losses will be so great as to force our agency to take drastic action under the prompt corrective action rules.”

Matz said that credit unions should not be forced to assume the cost.

“This outcome seems especially egregious,” Matz wrote. “In our view, it is manifestly unfair to permit a government-sponsored enterprise that survives solely because of massive infusions of tax dollars to benefit from a fraud perpetuated by an entity it held out to the public as an ‘approved’ business partner.”

Meanwhile, the credit unions are expanding their lobbying and media outreach.

The Hahn & Hessen law firm hired Jones Walker and Sabiston Consultants to lobby on behalf of the credit unions.

The Credit Union National Association is discussing the issue as part of its Hike the Hill grassroots effort this week. And fliers are being handed out near Capitol Hill Metro stops.

Five members of the New York congressional delegation urged Fannie Mae in late September to repay $42 million to Suffolk Federal Credit Union, one of the unions caught up in the fraud.

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