Lisa Cook faces removal as Trump escalates clash with Federal Reserve leadership. Photo / Getty Images
President Donald Trump’s move to fire United States Federal Reserve governor Lisa Cook was the latest illustration of his Administration’s surprising new weapon against its enemies: their own mortgages.
Trump and other officials raised allegations of mortgage fraud last week against Cook, a prominent economist put on the Fed board by former President Joe Biden.
The Justice Department is investigating the claims now, and Trump says the allegations alone are enough for him to push her out of her seat.
Additionally, the Justice Department received a criminal referral over the real estate records of New York Attorney-General Letitia James, who has filed multiple lawsuits against both Trump administrations.
And in July, Trump publicly accused Senator Adam Schiff (Democrat-California) - who led impeachment proceedings against the President as a House member - of mortgage fraud.
The result, legal experts say, is an escalation in the way Trump officials seek to penalise, remove or even jail adversaries.
After referrals from the Federal Housing Finance Agency, a relatively small department run by a close Trump ally that oversees the mortgage market, all three individuals now face criminal probes from the Justice Department.
Adam Levitin, an expert in financial regulation and consumer protection at Georgetown Law School, said people who commit mortgage fraud should be held accountable.
But those investigations would typically be brought by the FHFA’s inspector general, not the agency chief.
Before Trump acted to remove Cook, Levitin said the Administration’s moves represented an “extraordinary abuse of FHFA’s power”.
“This is like the county sheriff who has his deputies pull over his political opponents every time they drive on the parkway,” Levitin said.
Trump disputed today that his Administration was weaponising mortgage information about people he doesn’t like.
“You can find out those records,” Trump told reporters at a Cabinet meeting at the White House. “I shouldn’t have to be doing it.”
Cook said in a statement that Trump “purported to fire me ‘for cause’ when no cause exists under the law, and he has no authority to do so”.
She added: “I will not resign.I will continue to carry out my duties to help the American economy as I have been doing since 2022.”
Cook’s lawyer, Abbe Lowell, said today that Trump’s attempt to fire Cook was based solely on a referral letter and lacked “any factual or legal basis”.
“We will be filing a lawsuit challenging this illegal action.”
A Fed spokesperson acknowledged Cook’s lawsuit in a statement today and said the central bank would abide by any court decision while continuing to carry out its mission.
The accusations - and Trump’s attention to them - underscore the influence of FHFA Director Bill Pulte.
Since taking office in March, Pulte has made his mark through non-stop posts on X, attacks on the central bank and an unpredictable policymaking style.
He also has Trump’s ear, at one point handing Trump a draft letter he could use to fire Fed Chairman Jerome Powell.
“If you commit mortgage fraud in America, we will come after you, no matter who you are,” Pulte said in a statement. He did not immediately respond to another request for comment.
Pulte’s office has received an “insane amount” of tips on mortgage fraud, including about people in power, he told Bloomberg Television last week.
He said: “This is right in the bull’s eye of what my job is”.
Still, Fed watchers and legal experts said there was an inherently selective nature to the allegations against prominent Democrats.
For example, Texas Attorney-General Ken Paxton, a Republican firebrand, and his now-estranged wife declared three separate homes as their primary residence in mortgage documents, reporting shows. Trump and Pulte have not called them out publicly.
Trump himself has been caught up in similar circumstances, with a New York court finding that his real estate empire committed fraud, though the penalty was overturned on appeal recently.
It isn’t clear how federal mortgage regulators began looking into paperwork filed by prominent Trump targets.
Shortly after taking over the FHFA, Pulte overhauled the company boards of Fannie Mae and Freddie Mac - the mortgage behemoths under the FHFA’s control - and made himself chairman of both companies.
Housing and legal experts say those moves, combined with his existing role at the top of the FHFA, could afford him access to vast troves of personal mortgage data. Direct involvement, though, would be highly unusual.
Before Trump’s move against Cook, Richard Briffault, who focuses on administrative law and public policy at Columbia Law School, said officials are publicising allegations before any formal charges or indictments.
“They are moving very quickly from saying, ‘There were inaccuracies or mistakes,’ which may or may not be true, to saying, ‘These had fraudulent intent,’” Briffault said.
The FHFA did not respond to questions about how it decides which tips to pursue or refer to the Justice Department, or whether Pulte has absolute authority to view individuals’ information. In interviews and on social media, Pulte has said people can send tips to fraudtips@fhfa.gov.
In a statement last week, Cook said that she would not be bullied into leaving her post and that she would gather her financial records to answer “any legitimate questions and provide the facts”.
James’ lawyers have said any errors were essentially paperwork mistakes.
Schiff denies wrongdoing. In an appearance on NBC on Monday, Schiff said Pulte was “essentially doing the President’s bidding”.
“Mortgage is their new weapon to go after their critics,” the senator said.
Mortgage fraud cases brought by the Justice Department typically involve people using false information to get a loan they wouldn’t otherwise qualify for.
Convictions are relatively rare: In fiscal 2021, 58 mortgage fraud offenders were sentenced in the federal system, according to the US Sentencing Commission. Between 2017 and 2021, the number of offenders fell by almost 70%.
People who are prosecuted could include those who tell lenders they plan to use a house as a primary home but actually plan on using it as a second home or rental property, for example.
Mortgage originators see primary homes as less-risky assets, so they offer lower mortgage rates on them. The allegations against James, Schiff, and Cook all centre on which of their properties were designated as primary residences.
Still, legal experts say public mortgage records don’t always indicate fraud because they can leave out agreements that borrowers have with their lenders about the properties, or information they disclosed during the application process, such as where they plan to live most of the time.
Individual counties or lenders might also have different definitions of primary residences.
In July, Schiff’s lawyers argued in a letter to the Justice Department that the Trump Administration omitted that kind of information, according to a copy later obtained by the Washington Post.
The letter includes a document that Schiff sent to Quicken Loans, the lender on his Maryland home, confirming that California was his principal legal residence and that he paid taxes in the state.
Schiff also noted that he’d been told by Quicken’s lawyers and the House Administration Committee that because his family lived in Maryland for most of the year, his house there could also be considered a primary residence for insurance underwriting purposes, the document read.
The letter also raises questions about the “highly irregular, partisan process” that led to the accusations, Trump’s post on social media about them and Pulte’s role in the investigations.
For example, the letter says that Pulte, not the FHFA’s Office of Inspector-General, made a criminal referral to the Justice Department in late May.
Normally, criminal referrals that stem from inspector-general investigations would come from the IG, not the head of an agency.
Pulte also made that referral before the Fannie Mae Financial Crimes Investigation Unit appears to have completed its review in mid-July, the letter states.
Referrals would typically be made after evidence is gathered and analysed, Schiff’s lawyers said.
Additionally, once Fannie’s investigations unit went through Schiff’s documents, it brought its analysis to Pulte, not the inspector-general. That analysis was also obtained by the Post.
Over the weekend, Pulte continued to hammer on mortgage fraud on social media. Last week he said two more criminal referrals had been made.
- Andrew Ackerman, Jeremy Roebuck and Perry Stein contributed to this report.
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