Mortgage Fraud Becomes a Key Issue from the Trump Era—What You Should Know

Mortgage Fraud Allegations and Investigations

• Trump's Accusations: President Donald Trump has accused Federal Reserve Governor Lisa Cook, New York Attorney General Letitia James, and California Senator Adam Schiff of mortgage fraud, while Texas Attorney General Ken Paxton faces similar allegations regarding inaccuracies in mortgages he signed.
• Trump's Legal Troubles: In 2023, a New York judge ruled that Trump committed fraud by inflating property values for loans. His previous venture, Trump Mortgage LLC, closed after just one year amid lawsuits.

Current Investigations and Legal Implications

• Special Prosecutor Appointment: Ed Martin has been appointed as a special prosecutor for the mortgage investigations against James and Schiff, which could impact the Federal Reserve's independence.
• Cook's Legal Action: Cook's lawyers are seeking a restraining order to prevent Trump from firing her, following his fraud allegations.

Mortgage Market Conditions

• Affordability Crisis: A Zillow analysis indicates that for a median-income family to afford a typical U.S. home, prices must drop by 18% or mortgage rates must fall to 4.43%. Currently, mortgage payments are nearly $1,000 higher per month than pre-pandemic levels.
• Rising Mortgage Fraud: As home prices soar, mortgage fraud is increasing. In Q2 2025, undisclosed real estate debt rose by 12%, and transaction fraud risk increased by 6.2%.

Patterns of Mortgage Fraud

• Common Fraud Techniques: Mortgage fraud often involves inflating income or assets, falsifying documents, misrepresenting property values, and using straw buyers or identity theft to secure loans.

Consequences of Mortgage Fraud

• Legal and Financial Repercussions: Discovering mortgage fraud can lead to loan denial, foreclosure, legal penalties, and credit damage. Federal penalties can reach up to 30 years in prison per count, with varying state laws.

Broader Housing Market Issues

• Housing Crisis Factors: The U.S. faces a housing crisis due to insufficient home construction, rising building material costs from tariffs, and stagnant wage growth, which has not kept pace with housing costs.
• Investor Impact: Investors buying homes to rent or flip have further tightened the market, reducing inventory for first-time buyers.

Market Reaction and Future Outlook

• Real Estate ETF Performance: Real estate ETFs are underperforming, with most showing negative trends over the past year. For instance, the SPDR S&P Homebuilders ETF is down 1.63%.
• Trump's Political Standing: Despite his mortgage fraud claims, a recent Quinnipiac University poll shows only 37% of voters approve of Trump's performance, indicating a potential disconnect with voters.
• Proposed Merger of Fannie Mae and Freddie Mac: Trump has suggested merging these entities into a new corporation, which could expand the mortgage market for first-time buyers, although details remain unclear.