Like the White Queen in Lewis Carroll’s “Through the Looking Glass,” I am capable of believing as many as six impossible things before breakfast.
But my credulity is strained past the breaking point by the charges of federal mortgage fraud laid against three leading adversaries of Donald Trump—Sen. Adam Schiff (D-Burbank), New York Atty. Gen. Letitia James, and (most recently) Federal Reserve Governor Lisa Cook, whom Trump purported to fire for cause Monday.
James is a Democrat. Cook served as deputy secretary of the Treasury during the Obama administration.
No one ever goes back and examines loan applications on performing loans for occupancy fraud; that would entail expenses for no benefit.
Adam Levitin, Georgetown Law
When she was originally nominated by President Biden in 2022 to complete an unfinished term, she didn’t get a single Republican vote in the Senate. When she was confirmed for a full term a year later, she got a single GOP vote.
What gets me, and should get you, is the thinness of these accusations despite how loudly they’ve been bruited about on the MAGA right as though they’re signals of profound moral turpitude on the part of the targets, and how they all originated in the Federal Housing Finance Agency, which is led by Trump acolyte and sycophant William J. Pulte, in private life a big homebuilder.
The important question, in the view of Adam Levitin of Georgetown Law, is who is driving these investigations and levying these accusations, and whether they reflect an “enemies list” Pulte has compiled on Donald Trump’s behalf. I asked the FHFA to respond to Levitin’s questions, but received no response.
Trump ginned up Pulte’s accusations against Cook into grounds to fire her; only the president can fire a Fed governor, and only on a showing of “cause.” The accusations are so meager that whether the firing will stand is an open question. In his firing letter, Trump accused Cook of “deceitful and potentially criminal conduct.” That’s an outrageous assertion, given that no evidence has been presented publicly to justify it.
The accusations against all three targets involve occupancy misrepresentations — occupancy fraud, if you like. Specifically, Cook, Schiff and James are accused of falsely telling mortgage lenders that the loans in question were for their primary residences.
The idea is that they may have received a break on the loan terms — a lower down payment required, or a lower interest rate charge — because lenders think kindlier of borrowers for primary residences.
But none of the public accusations from the FHFA specify what, if any, financial advantages were received by the targets.
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Occupancy fraud is a fairly low-level problem for mortgage lenders, which tend to judge the creditworthiness of borrowers more on such factors as the borrowers’ income and the value of the property versus the loan amount, and on the borrowers’ credit history. Moreover, the specifics of each case are amazingly weak.
And it’s unlikely that they’re the result of random audits of FHFA loans, as Levitin observed in relation to the Cook case.
“No one ever goes back and examines loan applications on performing loans for occupancy fraud; that would entail expenses for no benefit,” he wrote. “Instead, the only way anyone would have noticed a problem with Cook’s loan application is that Pulte, as head of FHFA, directed Fannie or Freddie to pull her application. That is unheard of.”
That concern is also raised by the memo from the quasi-governmental mortgage lender Fannie Mae to Pulte that generated the accusation against Schiff. As my colleagues Kevin Rector and Laura J. Nelson reported, the one-page memo makes no allegation of fraud. (Fannie Mae didn’t originate any of the loans — its role is to buy mortgages from banks and package them for later sale.)
More to the point, the memo states that all five of the mortgage loans that were its subject already had been paid off before July 14, the memo’s date. There’s no indication in the memo or otherwise that the loans were ever in arrears or in default, or otherwise impaired in any way.
The Fannie Mae memo says that the FHFA inspector general demanded “the loan file and any related investigative or quality control documentation, as well as all other loans associated with…Adam B. Schiff.” (The ellipsis signifies a redacted portion of the memo.) Since there was no prior indication of wrongdoing in relation to Schiff’s loans — a 2023 CNN article on his ownership of two homes concluded that he was “likely not in any legal jeopardy” — where did the impetus for this demand come from?
As the request from FHFA was specifically directed at Schiff’s mortgages, it obviously wasn’t the result of a random screening of Fannie Mae loans. That lends strength to Schiff’s contention that the accusation “is just Donald Trump’s latest attempt at political retaliation against his perceived enemies. So it is not a surprise, only how weak this false allegation turns out to be.”
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I asked FHFA who at the inspector general’s office demanded the files, what was the reason for the demand, and whether Pulte played any role in the demand. I received no response.
In terms of their effect on the targets’ reputations, the accusations have hit their mark. All three targets have had to respond through public statements and the hiring of legal counsel. James has said she “will not be intimidated by bullies — no matter who they are.” She called the allegations “baseless” and “nothing more than a revenge tour.”
James, it will be recalled, won a verdict in state court last year that Trump had committed, ahem, mortgage fraud. A New York appeals court last week reversed the $465-million judgment imposed by the trial judge, but let the fraud conviction stand. The case seems destined to go to the state’s highest court, the Court of Appeals.
Schiff has been one of Trump’s most obdurate adversaries in Congress, first as a representative, and as of this year, as a senator.
The febrile reactions voiced by Pulte and the MAGA faithful make the accusations against Cook and the others indistinguishable from partisan smears. On X, Pulte posted the criminal referral letter he sent Atty. Gen. Pam Bondi about Cook. A few days later, he tweeted: “Lisa Cook is cooked.” Then he gave the game away by tweeting, “I believe the President has cause to fire Lisa Cook.” That was their goal from the start, they just needed time to dredge up a pretext. Never mind that the Department of Justice hasn’t said whether it will prosecute Cook, that the accusations haven’t been proven and whether they rise to the level of a fireable cause is wildly improbable.
What’s pertinent is that Cook was part of the Fed committee majority that, along with Fed Chairman Jerome Powell, voted against lowering interest rates at its most recent meeting, thwarting Trump’s demand for a rate cut. If he can remove Cook and replace her with a rate-cut advocate, he can put more pressure on Powell to opt for a rate cut by depriving Powell of his majority of supporters on the board. As it happens, the board has been inching toward cutting rates in September already but it could lose its crucial independence from Trump.
Prior to Trump’s order, Cook signaled her resistance. “I have no intention of being bullied to step down from my position because of some questions raised in a tweet,” she said in a formal statement. “I do 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.” She didn’t immediately respond to her attempted firing.
That brings us to the facts of these three cases, as far as they’re known. Legal analyst Jeffrey Toobin recently described the James and Schiff cases as “political hit jobs.” (He wrote just before the Cook case surfaced.)
As Toobin outlined the James case, the accusation is that in 2023, she financed the down payment for a niece’s purchase of a home in Norfolk, Va. In all but one of several documents, she stated that the niece would live in the house; according to her lawyer, on one form she said she’d be the occupant. But the bank could hardly have been misled, given the other documents.
Similarly nugatory paperwork errors are at the heart of two other elements of the case. One form filed in 2001 regarding a Brooklyn brownstone bought for her family listed the property as having five units, but all the other pertinent forms stated correctly that it was four units.
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And in the 1983 purchase of house in Queens, New York, James’ father identified her as his spouse, not his daughter, on one form among others that identified her correctly. James’ lawyer says she didn’t benefit financially from any of the errors.
The allegations against Schiff relate to his ownership of two homes, one in Burbank and the second in the Washington, D.C., area. But his dual ownership obviously was known to his mortgage lenders, and he has said that he took the homeowner’s property tax exemption only on the Burbank property.
As for Cook, every claim about her that Pulte has made on social media seems to undermine his position. Last week he posted a fragment of Cook’s federal disclosure form, identifying her three mortgages, all originated in 2021, as a 15-year loan at 2.5% and two 30-year loans at 3.25% and 2.875%.
If these are supposed to have been preferential rates based on the unproven allegation that she obtained them by claiming that they all concerned her primary residence, it doesn’t seem that she got much of a break. In 2021, the average 30-year mortgage rate ranged from 2.79% to 3.05%. (It isn’t clear at what point during the year the loans originated.) The average 15-year mortgage rate never reached as high as 2.5% at any point in the year, so she paid more than the average.
Back in 2014, David H. Stevens, a former federal housing official then serving as CEO of the Mortgage Bankers Assn., told the Washington Post that the paper file for a standard mortgage had ballooned to 200-500 pages. “The likelihood of a minor defect is almost 100 percent,” he said. That reduces the significance of the errors Pulte claims to have found nearly to the vanishing point, especially given the paucity of evidence that Schiff, James or Cook got a financial benefit from any of them.
As the judge in that case noted, the law is not concerned with insignificant trifles. In the Trump case, however, he declared that Trump and his fellow defendants saved tens of millions of dollars. “The frauds found here,” he wrote, “leap off the page and shock the conscience.”
Pulte has defended his campaign against those Trump adversaries with the declaration that no one is above the law, and even these errors are criminal. Is that so? If he really believes that mortgage fraud is a disqualification for public office, why hasn’t he turned his sights on a public official who was adjudicated at trial as a mortgage fraudster on a grand scale. The judge in the Trump case has given him a road map.
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This story originally appeared in Los Angeles Times.
