Allegations of mortgage fraud have taken center stage in a growing political and legal storm, with President Donald Trump’s administration deploying these claims to target high-profile opponents and, in a notable escalation, to justify firing Federal Reserve Governor Lisa Cook. The latest developments, reported by CNN and other major outlets, highlight a complex web of accusations, legal maneuvering, and political strategy that could reshape the boundaries of presidential power and the independence of critical U.S. institutions.
On August 28, 2025, Federal Housing Finance Agency Director Bill Pulte sent a new criminal referral against Lisa Cook to U.S. Attorney General Pam Bondi. This referral, concerning a third property in Massachusetts, followed earlier complaints that Cook fraudulently listed homes in Michigan and Georgia as her “primary residence” when obtaining mortgages in 2021. Such a declaration typically secures more favorable loan terms, and the Trump administration alleges this amounted to occupancy fraud.
Cook, a tenured economics professor at Michigan State University and the first Black woman to serve on the Federal Reserve Board of Governors, has not been charged with any crime. She responded to her firing by suing President Trump, arguing that the move lacked proper due process and constituted a power grab that could inflict “irreparable harm” on the U.S. economy. In her lawsuit, Cook contends that the allegations are being used as a “weapon of choice” by Trump to remove officials who stand in the way of his agenda. Her attorney, Abbe Lowell, told the court, “Trump is not seeking a Fed governor who has never committed an infraction in their life, but one who would lower the interest rate that Trump demanded.”
The legal battle reached a pivotal moment on August 29, 2025, in a hearing that capped weeks of criticism of the Federal Reserve by the Trump administration. The judge presiding over the case focused on whether President Trump had legitimate cause to fire Cook and whether she had been afforded the due process required under U.S. law. Cook’s legal team argued that her firing, announced through a series of social media posts, did not constitute proper notice or procedure. The judge expressed discomfort with both Cook’s argument that the firing was a pretext and with Trump’s explicit statements about wanting to secure a majority on the Federal Reserve Board by replacing current members.
Justice Department attorney Yaakov Roth countered that Cook’s failure to explain the alleged mortgage discrepancies supports Trump’s authority to remove her for cause. “If there was an explanation, we would have heard it by now,” Roth stated. He further argued that the president’s discretion to fire a Federal Reserve governor for cause is broad, and that judicial review of such decisions should be highly deferential to avoid intruding on the president’s constitutional prerogatives.
At the heart of the controversy is the concept of occupancy fraud—misrepresenting the intended use of a property, such as claiming it will be a primary residence, to obtain lower interest rates on a mortgage. This practice, while illegal, is reportedly widespread. A 2023 study from the Federal Reserve Bank of Philadelphia found over 22,000 potential cases of occupancy fraud between 2005 and 2017 among 580,000 loans studied. Among property investors, about one-third appeared to have engaged in the practice.
President Trump’s use of these allegations has not been limited to Cook. According to CNN, similar claims have been leveled against California Senator Adam Schiff and New York Attorney General Letitia James—both prominent Democrats who have previously investigated Trump. Schiff was accused of claiming primary residences in both Maryland and California, which allowed him to benefit from a property tax break. A spokesperson for his Senate campaign explained that “the properties were both claimed as primary residences for loan purposes because they are both occupied throughout the year.” Letitia James, meanwhile, is accused of claiming homes in New York and Virginia as primary residences, although her lawyer has acknowledged only “insignificant” mistakes on some records, emphasizing that these were “cherry-picked” from a larger set of accurate documents.
The selective application of these allegations has raised questions about political motivations and the risk of a slippery slope. Notably, Republican Texas Senator John Cornyn brought attention to similar accusations against Texas Attorney General Ken Paxton, a fellow Republican who has claimed three properties as his primary residences on mortgage applications. Two of those properties, The New York Times reported, appear to be rental properties, and Paxton has also rented out at least two properties purchased as vacation homes. Paxton declined to comment for media reports.
This bipartisan pattern of alleged misconduct has prompted some, including Cornyn and The Wall Street Journal, to call for equal scrutiny regardless of party affiliation. The Journal’s editorial questioned, “Does he think only Democrats fudge on mortgage applications?”—underscoring the perception that Trump’s focus has been selective and self-serving.
Experts cited by Reuters and CNN suggest that lawmakers could be legally protected if they were transparent with their lenders about how they intended to use the properties. In Cook’s case, for example, she reportedly did not receive especially favorable interest rates; her rates were actually higher than national averages at the time. Schiff’s spokesperson also asserted that his lenders made decisions “after being given full knowledge of the senator’s year-round bicoastal work obligations.” Cook herself has suggested that a clerical error may have been responsible for the discrepancies in her mortgage filings.
The broader implications of these cases are significant. If the Trump administration pursues these kinds of mortgage fraud allegations aggressively, the sheer number of potential targets could be vast. The Philadelphia Fed study suggests thousands of officials and lawmakers, especially those with multiple residences due to their work in Washington, could be vulnerable to similar scrutiny. As the Journal editorial noted, a consistent crackdown would likely ensnare allies as well as adversaries—raising the stakes for both parties.
Meanwhile, the Federal Reserve has acknowledged Cook’s ongoing legal effort to clarify her employment status during the court proceedings. A spokesperson said the agency would abide by the court’s decision and defer any action on her work status until the legal questions are resolved. The Justice Department, for its part, has argued that Cook is “highly unlikely to prevail on the merits” of her claim that Trump illegally fired her without cause, contending that “removal for ‘cause’ is a capacious standard, and one Congress has vested in the discretion of the President.”
With the judge expected to rule only after further legal briefs are filed, the case remains in limbo. The outcome could have far-reaching consequences, not just for Cook and the Federal Reserve, but for the balance of power between the executive branch and independent agencies, and for how allegations of financial impropriety are wielded in the nation’s increasingly contentious political battles.
