Mortgage Collapse: Not All Guilty Parties Will Get Off

A depressing truth of the mortgage crisis is that while numerous individuals and companies broke or bended the law in pursuit of profits, very few are likely to see the inside of a court house much less a prison cell. The inability of prosecutors to indict Angelo Mozilo, of Countrywide, is a case in point. That company engaged in rampant illegality to boost earnings, but the man who ran it will live out his days as a free multi-millionaire. 

Instead of nailing the kingpins, prosecutors have largely been catching smaller operators engaged in mortgage fraud. So it was reassuring to hear today that the feds had nailed -- and given real prison time to -- a somewhat bigger fish for a fraud that totaled $136 million.

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.

Executive Sentenced to 14 Years in Mortgage Fraud Case