The Primary-Residence Scam: Here’s Why James, Schiff, Cook, and Swalwell’s Mortgage Fraud Cannot Be Tolerated

Guest post by Joel Gilbert

The American mortgage system is one of the largest and most intricate financial infrastructures in the world.

It relies on a vast network of borrowers, lenders, underwriters, title companies, insurers, appraisers, and global investors who buy mortgage-backed securities. Every link in this chain depends on one thing: accurate, truthful information.

When borrowers falsify occupancy status, particularly by pretending a property is their primary residence, they distort risk, manipulate pricing, and inflict real financial harm on both lenders and honest borrowers.

This is why prosecutors have long treated primary-residence fraud as a serious federal offense, and I believe it’s why Director Bill Pulte and Federal Housing Finance Agency (FHFA) regulators are referring violators to the Department of Justice.

A Straightforward Example: Maxine Waters Told the Truth

California Election Code §349 requires its elected officials to maintain a “domicile” and “fixed habitation” in California, and the U.S. Constitution requires they be an “inhabitant” of their home state.

Congresswoman Maxine Waters complies. While she owns a home in Los Angeles, her mortgage documents for her Washington D.C. residence correctly identify 2105 1/2 S Street NW as a second home, both in her 1991 purchase and in her 2007 refinance.

As an honest public official, Waters accepted slightly higher interest rates than if she had lied and claimed her Washington D.C. home was her “principal residence” (or primary home), a designation which receives the lowest rates available because they are considered lowest risk by lenders.

The “Bad Four”: When Politicians Misrepresent for Personal Gain

Enter Adam Schiff, Letitia James, Lisa Cook, and Eric Swalwell. These public officials have done the opposite of Maxine Waters, misrepresenting their home occupancy to manipulate banks to obtain lower, owner-occupied interest rates they are not entitled to.

U.S. Senator Adam Schiff declared two different homes as his primary residence, one in Potomac, Maryland, and another in Burbank, California.

Like Adam Schiff, Lisa Cook, a Federal Reserve Board Governor, declared two different properties as primary residences in different mortgages, one in Michigan and another in Georgia.

California Congressman Eric Swalwell declared his Washington, D.C. home as his principal residence in his mortgage documents, a status he is required to maintain in California.

His lack of any verifiable California home means he’s in violation of state election law. If Swalwell can somehow provide a California home address, he is committing mortgage fraud in Washington, D.C.

Letitia James, New York’s Attorney General, bought two homes in Norfolk, Virginia, in recent years. She declared one as her primary residence despite being a New York state resident.

James declared her other Norfolk residence as a “second home,” but then treated it as a rental property in violation of her mortgage terms.

In addition, Letitia James, for more than 24 years, misrepresented her five-unit building at 296 Lafayette Avenue in Brooklyn, variously claiming it had one to four units to illegally obtain refinancing, a federal government HAMP loan, and mortgage lines of credit at lower interest rates and closing costs.

This is the same crime as “primary residence” fraud, misrepresenting key mortgage data for financial gain.

Why the Truth Matters to the System

The distinctions between a primary residence, a second home, or a rental property is central to the economics of mortgage lending. Historical data shows that borrowers are 3-4 times more likely to default on non-owner-occupied properties.

Allowing lies about occupancy hides this elevated risk.

How about down payments? Primary residences may require as little as 3-5% down, while second properties are often 20-25% higher.

When someone misrepresents a second home or investment property as their primary residence, they distort the lender’s assessment of risk.

The bank thinks they are issuing a safer loan than they actually are. In reality, they are being exposed to the elevated risks associated with investment properties including higher vacancy rates, greater likelihood of strategic default, and more volatile cash flows.

If this deception is tolerated, the pricing model for mortgages collapses. The lender cannot correctly measure risk, and without accurate risk assessments, the cost of lending rises for everyone.

Make no mistake, primary-residence fraud is theft. Lying about primary residence constitutes mortgage fraud, a federal crime under 18 U.S.C. § 1014. Penalties may include federal felony charges, up to 30 years in prison, fines up to $1 million, and civil liability, including treble damages.

The 2008 crisis proved what happens when lenders package inaccurate or misleading loan data: market collapse and taxpayer-backed bailouts.

This is because mortgage fraud strikes at the heart of the lending system. If lying about a primary residence were tolerated, the mortgage system would degrade rapidly. Risk-based pricing would stop functioning.

Investors would lose confidence in loan pools. Neighborhoods would suffer from hidden absentee ownership.

Mortgage rates would rise as lending standards tighten, and millions of legitimate buyers would be locked out of the market.

In the end, the actions of Letitia James, Adam Schiff, Lisa Cook, and Eric Swalwell aren’t harmless technicalities, they are deliberate manipulations of a system they are sworn to uphold.

These four officials sit at the pinnacle of public trust – a state attorney general who lectures others about integrity, a senator who postures as a defender of democracy, a Federal Reserve governor responsible for national economic stability, and a congressman obligated to follow the very laws he writes.

Yet each exploited the mortgage system for personal financial gain, securing benefits ordinary Americans would be criminally charged for attempting. Their conduct isn’t simply hypocritical, it is corrosive.

When the people entrusted with enforcing the rules instead violate them, they weaken the entire financial system, erode public confidence, and show contempt for the citizens they serve.

Joel Gilbert is a Los Angeles-based film producer and president of Highway 61 Entertainment. He is the producer of the new film Roseanne Barr Is America. He is also the producer of: Dreams from My Real Father, The Trayvon Hoax, Trump: The Art of the Insult, and many other films on American politics and music icons. Gilbert is on Twitter: @JoelSGilbert.

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