How many members of Congress, federal judges, governors, attorneys general, and other federal and state leaders have submitted home-loan applications with falsehoods in them?
Too many, I think, to make felons of them all.
The question arises as the Trump administration threatens charges against three prominent Democrats who have angered the president: U.S. Senator Adam Schiff of California, New York Attorney General Letitia James, and Federal Reserve Governor Lisa Cook. All stand accused of submitting an application for a home loan stating that the property would be their primary residence, then treating another property as their primary residence. (Schiff and James have denied wrongdoing. Cook is suing Donald Trump for attempting to fire her, a move her lawyer has said “lacks any factual or legal basis.”)
The alleged offense might sound minor, but it’s a felony that can yield multiple years in prison. In an editorial, The Wall Street Journal argued that Bill Pulte, the Trump appointee who referred all three cases to the Department of Justice, seems preoccupied with using his power as a housing regulator against Trump’s opponents. The Journal called the administration’s actions “an ominous turn in political lawfare.”
Pulte denies that he is fishing for wrongdoers. “If you commit mortgage fraud in America,” he wrote on X on Monday, “we will come after you, no matter who you are.” But so long as his actions and statements are focused on prominent enemies of Trump, no fair observer can trust his word. If the administration prosecutes these cases, it will cause many Americans to deem its actions illegitimate. And Democrats, whenever they return to power, could succumb to the temptation to prosecute Republicans for mortgage fraud, continuing a dysfunctional cycle of revenge.
No one should want federal bureaucrats poring over loan documents and consistently prosecuting all falsehoods. There are, of course, some mortgage-fraud cases in which perpetrators knowingly commit a serious transgression, and the cost to lenders can be high. In a 2023 research paper, Ronel Elul of the Federal Reserve Bank of Philadelphia found that some real-estate investors use occupancy fraud—misrepresenting themselves as owner-occupants—to obtain lower mortgage rates than they otherwise could get, and that they default at a higher rate than other investors. Such fraud “is broad-based,” Elul and two co-authors write: They find that these fraudulent borrowers make up one-third of the population of investors seeking mortgages. Few fraudulent borrowers are charged. In fiscal year 2024, the federal government filed fewer than 20 total cases of mortgage fraud, according to the U.S. Attorneys’ annual statistical report.
Prosecuting the kind of fraud that Elul documented, however, is far different from making a felon of, say, a low-risk borrower who puts incorrect information on a form when purchasing a vacation house. Loan paperwork is confusing. Confronted with hundreds of pages and dozens of places to sign and initial, many borrowers simply trust a loan officer or adviser when they say something like, You always check this box. It’s fine.
Regularly prosecuting cases like the ones the Trump administration is grandstanding about would enmesh many unwitting wrongdoers in legal nightmares, just as the civil-libertarian attorney Harvey Silverglate warned in his 2009 book, Three Felonies a Day. In it, he distinguishes between common-law crimes such as theft, assault, and murder, which all perpetrators know to be serious transgressions, and the many federal laws that make felons out of people who don’t even realize that they are doing something wrong. “Trump’s pursuit of these mortgage fraud cases is precisely what I warned about,” Silverglate wrote to me when I reached him by email earlier this week. “This system paves the way to tyranny—a system in which, alas, I fear we find ourselves.”
Of course, there is no way that the Trump administration would agree to review the home loans of its own political appointees and fire, let alone prosecute, anyone who claimed more than one primary residence. There is no way Republicans in Congress would agree to a third-party review of their home-loan applications. The Associated Press, citing a review of public documents, reported in July that two Republican officials, Texas Attorney General Ken Paxton and his wife, Angela, a state senator in Texas, had signed mortgages that “contained inaccurate statements declaring that each of those three houses was their primary residence, enabling the now-estranged couple to improperly lock in low interest rates.” (Neither Ken nor Angela Paxton responded to the AP’s requests for comment.) Trump officials are treating their political enemies in a way that they’d never treat political allies, a far more serious and corrosive betrayal of the rule of law than what they are alleging that Schiff, James, and Cook have done.
And Trump himself is guilty of an especially flagrant double standard. When he said he was firing Cook—who is among the Federal Reserve governors who has voted to keep interest rates steady, against Trump’s wishes—he sent her a letter that cited the mortgage-fraud allegations and stated that Americans “must be able to have full confidence in the honesty of the members entrusted with setting policy and overseeing the Federal Reserve.” But Trump, who oversees the whole executive branch, was found liable last year for greatly inflating his assets to get better rates on bank loans. “A discrepancy of this order of magnitude, by a real estate developer sizing up his own living space of decades, can only be considered fraud,” the judge in the case wrote. Trump appealed; a higher court reversed the financial penalty the judge had imposed, but the ruling so far stands.
Targeting political enemies for prosecution is corrosive. Asking Americans to believe that you find their alleged behavior disqualifying when you were found guilty of similar behavior on a much bigger scale insults the intelligence of the public. The inevitable effect is to amplify outrage and inspire others to seek revenge.
As the Wall Street Journal editorial board notes, “Misstating information on mortgage applications doesn’t appear to be uncommon.” Perhaps that’s cause for reform of some sort—or maybe banks often don’t care about the “primary residence” distinction for good reason, such as if they can determine that the buyer in question is low-risk. But there is every reason to surmise that, given enough time to dig through loan applications, the Trump administration––or the Newsom or Ocasio-Cortez administration––could selectively prosecute enough people to intimidate the opposition, or hold the prospect of felony prosecutions over political opponents to silence them.
Détente is the only sane course. But we have as president a 79-year-old lame duck who won’t have to deal with the long-term consequences of his actions, so insanity may prevail.
The post Show Me the Person, and I’ll Show You the Crime appeared first on The Atlantic.
