The day began with allegations that Fed Governor Lisa Cook engaged in mortgage fraud. Specifically, she was accused of purchasing two properties in quick succession and claiming both as primary residences. Typically, designating a property as a primary residence allows for lower interest rates compared to a second home, which lenders view as a greater risk.
The details remain unclear. According to a letter sent to Attorney General Bondi, FHFA Director Pulte raised the accusations, but the timeline and context are uncertain. Did she sell one property within a month? A year? Without clarity, it’s difficult to assess the seriousness of the charges or whether they amount to more than technical infractions.
The broader question is what penalties normally apply in such cases. For an ordinary borrower, misrepresenting a primary residence could mean higher rates retroactively, repayment demands, or financial penalties — but not typically job loss. The key issue is whether such an allegation, substantiated or not, would affect Cook’s ability to perform her role at the Federal Reserve. Is it a fireable offense? Did it affect her job performance?
I queried ChatGPT and asked what the penalties are for falsely claiming a home as your primary residence. Below are the responses:
1. Mortgage Fraud (Lenders / Loan Applications)
If you falsely claim a home is your primary residence to get a lower mortgage rate or lower down payment, that is mortgage fraud.
Penalties can include:
Loan acceleration (lender demands immediate repayment).
Foreclosure if repayment isn’t possible.
Fines and restitution.
In severe cases, criminal charges — mortgage fraud is a federal offense, punishable by up to 30 years in prison and $1 million fine, though that’s for large-scale or willful fraud. Most cases historically result in financial penalties or loan consequences, not prison.
2. Tax Treatment of Capital Gains on a Primary Residence
The IRS allows you to exclude up to $250,000 ($500,000 married) of capital gains if the home was your primary residence for at least 2 of the past 5 years.
If you misrepresent that a property was your primary residence:
The IRS can disallow the exclusion.
You’d owe back taxes, interest, and penalties on the capital gains.
Civil fraud penalties can be up to 75% of the underpaid tax.
Criminal fraud charges are rarer but possible if misrepresentation was willful.
3. Property Tax / Homestead Exemptions
Some states/counties offer lower property tax rates if the home is a primary residence.
If misrepresented:
Back taxes and interest are due.
Some jurisdictions add a penalty of 10–50% of the unpaid taxes.
Repeat or deliberate fraud can bring criminal charges at the state level.
✅ Summary:
Lenders → mortgage fraud (serious, possible criminal).
IRS → lose capital gains exclusion + taxes/penalties.
Local property tax → back taxes + fines.
In most historical cases, the biggest impact is financial (back taxes, penalties, loss of benefits) — jail time is usually reserved for larger, willful fraud schemes.
What happened? What were the implications? Has she continued to make the payments on both places? Did she sell the properties? Is she living in one of the places as her primary residence?
That is what lawyers are for. One can assume that she will have increased lawyer bills.
Can Trump fire her?
Remember, Trump wanted to fire Powell one Monday morning after a few extra bogeys on the golf course on Sunday (or something similar – he was angry), but was advised that it wasn’t possible. Nevertheless, it’s always worth a try.
He did fire the BLS Commissioner, but that was more job-related (not doing her job). Besides who knows, if there was some payoff that made sense. Some people don’t want to stay in the frying pan, and would rather sign an NDA and collect a lump sum, or pension. I don’t think of BLS Commissioner has the post-firing financial and job bounce back that a Fed Gov. or Fed chair potentially has.
Chairman Powell seems to be in it for the long haul. What will Lisa Cook do?
So far, the letter is “allegations” of “potentially” committing mortgage fraud, followed up by some strong words and more allegations of potentially committing mortgage fraud.
It is too early to tell.
This article was written by Greg Michalowski at investinglive.com.