(Reuters) -U.S. President Donald Trump says he is removing Federal Reserve Governor Lisa Cook for “cause,” citing what he said were “false statements” on two mortgages she took out in 2021, about a year before the Senate confirmed her appointment to the Fed.
The thrust of Trump’s accusation – first made public by Federal Housing Finance Agency Director William Pulte in a criminal referral to Attorney General Pam Bondi’s office – is that Cook misrepresented her residency status for the loans, claiming both as her primary residence.
Cook, in a statement issued through the law office of Abbe Lowell, says she will not leave her job and that Trump has no authority to fire her “when no cause exists under the law.” Her lawyer says they will file a lawsuit to challenge the attempted removal. Cook did not respond to queries on the details of her mortgages.
Here is what is known, and not known, about the mortgages.
PROPERTIES
Cook’s annual financial disclosure, filed with the U.S. Office of Government Ethics, shows one mortgage for an investment property and two mortgages for personal residences. All were dated 2021, when the Georgia native was a professor at Michigan State University and before her May 2022 confirmation by the Senate to the Fed Board of Governors.
The loans were originated about 15 months into the COVID-19 pandemic when interest rates had plunged due to the Fed’s efforts to support the economy during the health crisis. Tens of millions of homeowners refinanced existing loans or obtained new mortgages during that period.
TWO ‘PRIMARY’ RESIDENCES
Cook’s mortgage paperwork does identify two different properties as her primary abodes.
A public records search identified a $203,000 mortgage in Cook’s name in Washtenaw County, Michigan dated June 18, 2021, and a $540,000 mortgage, also in her name, in Fulton County, Georgia, dated July 2, 2021. The mortgages were originated by the University of Michigan Credit Union for the Michigan property and Bank Fund Credit Union for the Georgia property.
Spokespersons for the two credit unions did not reply immediately to a request for comment.
Documentation for both contains an identical occupancy clause that requires the borrower to, within 60 days, “occupy the property as borrower’s principal residence for at least one year after the date of occupancy, unless lender otherwise agrees in writing, which consent shall not be unreasonably withheld, or unless extenuating circumstances exist which are beyond borrower’s control.”
It is not known if Cook obtained such an agreement, if there were extenuating circumstances, or whether or for how long she occupied either property.
WHY DOES IT MATTER?
Mortgages obtained for primary residences can come with cheaper financing than those for investment properties, which have a higher default rate and are typically subject to tighter underwriting by lenders.
A study published in 2023 by the Philadelphia Fed found that occupancy fraud – misrepresenting a property as owner-occupied when it is intended as a rental property – is widespread. It was not known if Cook’s properties were intended to be owner-occupied.
“The real question to ask here was, was there any misleading of lenders,” Cornell University Law Professor Robert Hockett said. “If the lenders knew… and they were able to factor that in in order to risk-price the lending, then that’s above board.”
THE BORROWING RATES
In fact, the mortgage rates Cook obtained were higher than the prevailing national averages at the time. It is not known when Cook locked in her mortgages, but typically borrowers fix their rate a month or two before the purchase.
Cook’s financial disclosure shows one personal residence mortgage of $100,001-$250,000. Though the address is not specified, it is the same 15-year borrowing term as on her $203,000 Ann Arbor, Michigan, mortgage.
From the beginning of April to early July, the national average for the 15-year rate ranged from 2.23% to 2.45%.
Cook’s rate was 2.875%.
Her financial disclosure identifies a second loan for a personal residence for $500,001-$1 million. Again the address is not listed but the value and term of the loan matches her $540,000 mortgage on her Atlanta, Georgia condominium.
The national average for a 30-year fixed rate mortgage ranged from 2.93% to 3.04% from April 15, 2021 to July 1, the day before she signed the mortgage, Freddie Mac data shows.
Cook’s rate was 3.25%.
Fraud, Cornell’s Hockett said, is generally “either affirmatively misrepresenting, or failing to disclose…such as to lead someone into taking a risk they wouldn’t otherwise risk, or give you something other than they would otherwise give you…the very fact that they didn’t give her an advantageous rate suggests they were informed.”
WHY THOSE CITIES
Public records show that Cook first bought the Ann Arbor home in 2005, when she first got her job as a professor at Michigan State University in nearby East Lansing. Cook was born in Georgia and graduated from Spellman College in Atlanta. It is not known when or for how long she lived in Atlanta.
MSU transitioned to remote teaching during the COVID-19 pandemic starting in March 2020, and returned to mostly in-person teaching in the fall of 2021.
(Reporting by Ann Saphir; Editing by Dan Burns and Chizu Nomiyama )
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