Mortgage Documents Raise Residency Questions for Treasury Secretary Yellen & Fed Governor Cook

Mortgage Documents Raise Residency Questions for Yellen & Cook

Foreign media outlets have recently highlighted a mortgage document revealing that Treasury Secretary Janet Yellen once agreed to designate two different homes as her "primary residence" simultaneously. This situation mirrors the stance taken by former President Donald Trump in his attempt to remove Lisa Cook, a governor of the Federal Reserve Board.

Yellen's conflicting agreement, dating back to 2007, involved designating homes in New York and Massachusetts as her primary residence at the same time. However, mortgage experts assert that there is no indication of any wrongdoing on her part. Instead, her case illustrates that inconsistencies in housing loan application documents do not necessarily constitute evidence of fraud.

Further evidence from Yellen's mortgage indicates that the lending bank, Bank of America, did not rely on these pledges and never expected both homes to be her primary residence. Cook's situation appears similar, as she signed mortgage documents in 2021 for a house in Michigan and an apartment in Atlanta, stating that they would both become her primary residence within the next year. Both agreements, made with different credit unions, included conditions for obtaining mortgage loans of $203,000 and $540,000, respectively.

However, one document reviewed by foreign media shows that Cook's Georgia property lender did not expect her to reside there full-time. In a loan estimate issued weeks before the credit union issued the mortgage, it was classified as a "vacation home.""

In a letter last month informing Cook of her dismissal, Trump stated that her contradictory mortgage pledges were sufficient to remove her from her position on the Federal Reserve Board, calling them a "potential criminal act," or at least evidence of "gross negligence." This move comes as Trump seeks to exert more direct control over the Federal Reserve this year. Cook has challenged her dismissal in court, saying the allegations against her are false.

On Monday, a federal appeals court allowed Cook to temporarily continue working, and the White House has announced that it will appeal this ruling. Cook attended the Federal Reserve's monetary policy meeting on Tuesday. White House officials did not respond to requests for comment.

Cook's conflicting mortgage agreements are, at least in some respects, similar to those made years ago by Besant, a Trump appointee. On September 20, 2007, Yellen agreed that a seven-bedroom Georgian-style estate she was purchasing in Bedford Hills, New York, would become her "primary residence" within the next year.

On the same day, she made the same pledge regarding a beachfront home in Provincetown, Massachusetts. Both agreements were signed by an attorney named Charles Rich, who had power of attorney to sign on Yellen's behalf.

These mortgages were provided by the same lender, Bank of America, as part of a larger $21 million financing secured by the two properties and other assets. In response to an inquiry from foreign media, Yellen representatives provided a statement from Bank of America confirming that the bank "understood and agreed that the Bedford and Provincetown properties were second homes.""

Attorney Rich, who signed the agreement on Yellen's behalf, wrote: "Bank of America was fully aware that (Yellen's) Provincetown property was not her primary residence and waived any requirement that it be used as such. There is absolutely nothing improper about (Yellen's) loan application, and she herself had very little involvement in it, as she delegated authority to me."

It's worth noting that in a previous appearance on Fox Business News, Yellen was asked about Trump's moves against Cook. She said: "Some people think President Trump is putting undue pressure on the Federal Reserve. And there are people like me and President Trump who think that if a Federal Reserve official commits mortgage fraud, it should be investigated, and they shouldn't be one of the top financial regulators in the country."

Alex Spiro, Yellen's attorney, said he could not comment on how Cook's situation compared to Yellen's, as he had not studied Cook's situation in detail.

However, the mortgage situations of both Yellen and Cook are not entirely identical. Yellen's mortgage was obtained nearly two decades ago and signed by her attorney, while Cook signed herself and much more recently.

The fact that Yellen is a wealthy hedge fund manager suggests that she would have no difficulty obtaining loans, and because both of Yellen's mortgages were obtained from the same bank and signed on the same day, it is unlikely that the lender was misled by her claim that she planned to reside elsewhere.

Cook's mortgages, on the other hand, were obtained from different banks and executed on different dates.

Nevertheless, similarities remain. Both ostensibly agreed to designate two different places as their primary residence at the same time, and each has evidence that this inconsistency did not mislead the lender, and that the bankers were aware of the planned use of the properties.

For the Trump administration, the issue was not about any wrongdoing on the part of the Treasury Secretary, but about "double standards," because Trump decided to exploit a technical problem with the primary residence to try to remove an "enemy.""

Bill Pulte, a Trump appointee who heads the Federal Housing Finance Agency, provided a rationale for Trump's dismissal of Cook when he accused her of potentially committing mortgage fraud on social media platform X last month. She is one of three Trump opponents Pulte referred to Justice Department prosecutors for mortgage fraud investigations. The other two are Letitia James, the New York State Attorney General, and Adam Schiff, a Democratic Senator from California. All three have denied committing mortgage fraud.

After a foreign news report first revealed a document showing that Cook's lender expected her Georgia property to be a vacation home, Pulte argued that it made no difference. "Cook is portraying herself as a very accomplished financial operator," Pulte wrote on social media site X. "If Cook requested an appraisal in the name of a vacation home and then signed a mortgage agreement in the name of a primary residence, that is extremely worrying, and in my opinion, further evidence of her fraudulent intent.""

Besant is at least one of two members of the Trump administration who have made similar conflicting housing occupancy pledges as Cook. Labor Secretary Lori Chavez-DeRemer agreed in January 2021 to continue living in her long-term residence in Oregon for another year as a condition of obtaining a mortgage loan. Then in March, she made a similar pledge regarding a property she was buying in Arizona. In July, she applied to run for a seat in the House of Representatives as a resident of Oregon.

Spokeswoman Courtney Parella said in an email that Chavez-DeRemer intended to make Arizona her primary residence when she obtained the mortgage in the state, but changed her mind when she was asked to run for Congress. She said Chavez-DeRemer complied with the law. "This is an insignificant story that was fabricated to attack the Trump administration," she added.

Owner-occupancy clauses are a standard part of residential mortgage agreements. Lenders sometimes offer better terms for primary residences, such as lower interest rates or down payment requirements, because people are more likely to repay loans on homes they actually live in. If someone deceives the lender as to whether they plan to live in a property, it may constitute mortgage fraud, although criminal prosecution is rare.

Neither Cook's nor Yellen's case sounds like fraud, because the borrower's plans to use the property as a second home were disclosed to the lender, says Douglas Miller, a real estate attorney in Excelsior, Minnesota, who has testified before a committee of the U.S. House of Representatives on mortgage market issues. "If the lender was aware of this, and the mortgage application also showed this, it is difficult for me to find consumer fault," he said.

Miller says owner-occupancy clauses are a standard part of U.S. mortgages, and that the typical way to waive this requirement for a second home is to attach an additional document, called a "second-home rider." He said that in Cook's and Yellen's cases, someone may have forgotten to attach that form. "At some point, you need to rely on the fact that you have made a disclosure to the lender, and if they miss a form, that is their responsibility," he said. "The whole thing has been blown out of proportion.""

In a memo filed last month as part of a lawsuit to challenge her dismissal, Cook raised the possibility that a clerical error led to her conflicting residency pledges, but added that even if she had made a mistake before joining the Federal Reserve, that could not be grounds for dismissing her.

Cook said in a statement last month, "I have no intention of resigning because of certain issues raised in a tweet."