President Donald Trump and his allies are demanding Federal Reserve Governor Lisa Cook resign over alleged owner-occupancy fraud — a practice the central bank itself has found to be “broad-based” across the US.
Philadelphia Fed researchers in a 2023 report assessed the number of “fraudulent investors” in the mortgage market, which they defined as those who had more than one owner-occupied home purchase loan within four quarters after the first one was originated.
READ MORE: Trump calls on Fed’s Cook to quit over mortgage probe
Federal Housing Finance Agency Director Bill Pulte has said that Cook took a mortgage on a property in Ann Arbor, Michigan, stipulating that it would be her primary residence, and then two weeks later declared the same for another mortgage on a Georgia property.
The paper’s data set consists of 584,499 loans made from 2005 to 2017. Of those, 22,431 were considered fraudulent. The share of those claiming occupancy for better mortgage terms peaked ahead of the 2008 financial crisis, though remained steady for much of the ensuing decade at about 2% to 3%.
The findings are based on a subsample of data, meaning the number of mortgages fitting the central bank’s criteria could be higher. The researchers also caution that there are likely cases of accidental occupancy fraud, such as when borrowers were unable to sell their original home because of a worse-than-expected real estate market.
Ronel Elul, a senior economic adviser and economist at the Philadelphia Fed who co-authored the 2023 report, didn’t elaborate beyond what was in the paper when reached for comment. The Fed declined to comment, while Cook didn’t reply to requests for comment.
David Joffe, a federal criminal defense attorney in Fort Lauderdale, Florida, said in his experience, occupancy cases are rare.
Still, “like anything else, if you look at it under a microscope you’re bound to find something that’s wrong,” he said in an interview.
The report found that about a third of all property investors misrepresent their status as owner-occupants. It found that doing so allowed them to obtain lower interest rates and higher loan-to-value ratios.
“This type of fraud is difficult to detect until long after the mortgage has been originated,” the Philadelphia Fed researchers said in their paper.
Cook’s mortgages in question were from 2021.
Trump’s administration has also made mortgage fraud allegations against California Senator Adam Schiff and New York Attorney General Letitia James. Both are Democrats and political foes of Trump.
