The battle between Federal Reserve Board Governor Lisa Cook and the Trump Administration over mortgage fraud allegations and their implications intensified this week.
Cook filed a temporary restraining order and issued court summons to several high profile officials in a lawsuit filed to block attempts to fire her over alleged misrepresentation, and housing regulator Bill Pulte posted a new criminal referral suggesting additional instances of mortgage fraud.
The new allegations and court filings keep the mortgage industry in the middle of a political and legal maelstrom that could play a key role in determining the industry’s outlook as Democrats defend and Republicans criticize the historically independent Fed’s interest rate policy.
What Pulte’s second criminal referrals alleges
The new redacted referral Pulte posted on social media involves properties Cook purchased in Cambridge, Massachusetts.
In the referral, Pulte alleges that four months before Cook took out loans that were the center of previous accusations that she represented more than one property as her primary residence, she represented a condominium property in Cambridge to be a second home.
The alleged concern that Pulte flagged related to the Cambridge condo was that several months later she represented it to be an investment property she would rent out in other government filings.
“By potentially falsely representing the property as a second home, Cook may have received savings by not declaring it as an investment property,” Pulte said in his referral.
Second homes the owner lives in some of the time carry less risk for lenders than investment properties where the renter may have less incentive to continue making payments. As a result, lenders tend to set a higher rate for loans on investment properties than those on second homes.
Democrats have criticized Pulte’s intervention related to the Federal Reserve Governor and urged him to “do his job” and turn his focus to broader housing measures. Pulte has said that the Cook allegations are part of a broader effort to more aggressively weed out fraud.
Fraud can present a concern for lenders doing business with government-sponsored enterprises that Pulte oversees and which buy a large number of mortgages in the United States because those GSEs may demand housing finance firms buy back such loans.
Cook files summons to Trump, Powell, and Bondi in TRO
On Wednesday, federal court filings in Cook’s lawsuit seeking to block her firing show summons issued to President Trump, Fed Chair Jerome Powell, Attorney General Pam Bondi and others.
Any “officer or employee of the United States” summoned must “serve on the plaintiff an answer to the attached complaint or motion” within 60 days or face “judgment by default” for the relief the complaint demands, according to the court filings.
Bondi’s office and the Federal Reserve Board of Governors also received summonses and were held to the same conditions.
The filing calling for an emergency TRO to be put in place until the courts can consider the case seeks to enjoin the Fed board, collectively or individually, and Chairman Jerome Powell, from “effectuating in any manner Governor Cook’s illegal purported removal.”
