Trump Accuses the Fed’s Cook of Mortgage Fraud. What Is It?

Few mortgage fraud cases are sentenced federally, according to government data. (David Paul Morris/Bloomberg)

President Donald Trump’s intended removal of a Federal Reserve governor is set to play out in court. Allegations of mortgage fraud are at the center of the issue.

Trump escalated his campaign against the Fed on Monday night, when he posted a letter on Truth Social, addressed to Lisa Cook, a voting member of the Fed, saying he was removing her from her position. The president cited prior allegations of mortgage fraud in a criminal referral written by Federal Housing Finance Agency director Bill Pulte that was sent to U.S. Attorney General Pamela Bondi.

Cook’s attorneys said on Tuesday that she intends to challenge the removal. “President Trump has no authority to remove Federal Reserve Governor Lisa Cook,” Abbe David Lowell, the founder of Lowell & Associates and counsel for Cook, said in a statement. “His attempt to fire her, based solely on a referral letter, lacks any factual or legal basis.” The issue could reach the Supreme Court, Barron’s reported Tuesday.

Pulte’s referral against Cook alleges she misrepresented two homes in a two-week period in 2021 as a primary or principal residence “in order to potentially secure lower interest rates and more favorable loan terms.”

“Typically, one of the properties’ mortgages would have been required to be a secondary residence mortgage or investment/rental property mortgage, depending on use, in order to have been legitimate,” Pulte wrote in the referral.

Cook was nominated to the Fed by then President Joseph Biden in early 2022, and was sworn in that May.

Lisa Cook is a governor on the board of the U.S. Federal Reserve. Photo: Anna Rose Layden/Bloomberg

Mortgage fraud itself is a broad category that comprises a variety of mischaracterizations on loans. The referral alleges that Cook misrepresented her occupancy of the properties. Other potential types of mortgage fraud run the gambit from not disclosing liabilities to committing identify theft, according to Fannie Mae’s guide for lenders.

Lenders view primary residences as lower risk for default than secondary or investment properties, notes Usha Rackliffe, an associate professor in the practice of accounting at Emory University’s Goizueta Business School. That results in lower rates for primary residences. “Every question on the mortgage application is designed to assess what you have, what you hold, and your ability to pay for these things,” she says.

Additional facts will influence how the allegations ultimately play out, she says. Among the relevant questions: whether Cook was the one who filled out the documents, whether she benefited financially, and whether any of her circumstances changed.

In the second quarter of 2025, roughly one in 116 mortgage applications showed signs of fraud, according to a recent report from Cotality, formerly CoreLogic. Indications of fraud were more common in purchase loan applications, at roughly one in 106, than in refinance applications.

Few mortgage fraud cases are sentenced federally, according to government data. U.S. Sentencing Commission data show that there were 38 mortgage fraud offenders sentenced in 2024, Barron’s previously reported.

Write to Shaina Mishkin at shaina.mishkin@dowjones.com