On Wednesday, August 20, President Donald Trump and his administration called for Federal Reserve Governor Lisa Cook to resign from her position after Bill Pulte, the director of the Federal Housing Finance Agency (FHFA), discovered that she allegedly engaged in mortgage fraud. And she’s not the only one. In previous weeks, the 47th presidential administration has claimed that both Senator Adam Schiff from California and the New York Attorney General Letitia James have also engaged in mortgage fraud at some point in their lives. But what exactly is it that Trump is accusing them of? And what can the effects of the alleged fraud have on their finances? We look into all of that and more below.
What is mortgage fraud?
Mortgage fraud is when someone withholds or misrepresents information that is supposed to help either fund or insure their loans. It can be committed by either the lender or the borrower and is considered a serious crime.
Some of the most common types of mortgage fraud for borrowers occur when they lie about things like employment status, income, debts and credit scores. The FHFA considers these to be fraud for housing, which they say “primarily consists of illegal actions by borrowers motivated to acquire or maintain ownership of a home.”
On the other hand, mortgage fraud for lenders happens when they lie about the true value of a property and obtain multiple loans for one single property. The FHFA considers this to be fraud for profit, which “usually involves industry insiders such as appraisers, brokers and loan originators. Such schemes aim to gain cash or home equity through abuse of the mortgage lending process.”
For Cook in particular, Pulte claimed that she had designated two homes as her primary residence after purchasing homes in Ann Arbor, Michigan, and Atlanta, Georgia, within two weeks of each other. He claimed that she had announced that both of them would be her primary residence, but then, a year later, she sold her home in Georgia.
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“Ms. Lisa DeNell Cook has falsified bank documents and property records to acquire more favorable loan terms, potentially committing mortgage fraud under the criminal statute. This has included falsifying residence statuses for an Ann Arbor, Michigan-based residence and an Atlanta, Georgia-based property in order to potentially secure lower interest rates and more favorable loan terms,” he wrote in a statement via X, formerly known as Twitter.
In response to this, Cook said in a statement that she does “intend to take any questions about my financial history seriously as a member of the Federal Reserve, and so I am gathering the accurate information to answer any legitimate questions and provide the facts.”
What are the penalties for mortgage fraud?
If you are found to have committed mortgage fraud, you will most likely be brought up on federal and state charges. You could also face jail time and a fine that can reach up to $1,000,000.
Additionally, committing mortgage fraud can significantly damage your credit score, making it more difficult to obtain loans in the future.
How to protect yourself from mortgage fraud
To avoid mortgage fraud, the Federal Bureau of Investigation (FBI) recommends triple-checking that everything you are putting on your documents is accurate. They also recommend making sure that the people you are working with on the mortgage are reputable and well respected both in the banking and the real estate industry, both of which can be done by searching their names on the internet and asking around to make sure that other people in your area have heard of them.
