A federal court has indicted New York Attorney General Letitia James on two charges of mortgage fraud, following grand jury testimony on Oct. 9. The prosecution in the case will be tasked with proving whether James intentionally misrepresented her intended occupancy status for a property she purchased in Virginia.
The U.S. District Court for the Eastern District of Virginia issued the indictment, based on arguments and documents presented by prosecutor Lindsey Halligan, a former defense attorney for President Donald Trump. Halligan alleged that James knowingly misrepresented her intended occupancy status with respect to a property she purchased in Norfolk, Va., in August 2020.
The loan was originated by AnnieMac Home Mortgage (also known as Old Virginia Mortgage), which is in the business of originating and underwriting residential mortgages backed by Fannie Mae.
Specifically, the indictment stated that James signed a “second home rider” provided by OVM Financial, a subsidiary of the AnnieMac, “which required James as the sole borrower to occupy and use the property as her secondary residence, and prohibited its use as a timesharing or other shared ownership arrangement or agreement that requires her either to rent the property or give any other person any control over the occupancy or use of the property.”
Despite the stated requirements under the second home rider, the indictment claimed the property in question was not occupied or used by James as a secondary residence and that she instead used it as a rental investment property. By misrepresenting her occupancy status with respect to the property, the indictment claims James was able to obtain “favorable loan terms not available for investment properties.”
James’s attorneys have dismissed the allegations as baseless, calling any errors in the loan application “honest mistakes.” They said the property was intended for a family member and there was no intent to mislead a financial institution.
Proving intent will be perhaps the most critical component of this case, as is the deciding factor with virtually any legal dispute alleging mortgage fraud.
Dodd Frank Update recently spoke with David Friend, attorney and owner of Friend Mortgage Consulting, about the challenges in proving intent to commit fraud, given the numerous more common ways misrepresentations of occupancy occur during mortgage transactions.
Friend explained that it is not uncommon for borrowers to end up with more than one primary residence to their name on paper without any intent to commit fraud. In general, contradictions and inaccuracies are more likely to occur as the result of human error or technology glitches during the origination process than malicious intent, he said.
Halligan was sworn in to serve as the interim U.S. attorney for the Eastern District of Virginia on Sept. 22, after the district’s former prosecutor, Erik Siebert, resigned following his refusal to pursue criminal charges against James.
She also recently sought and obtained an indictment against former FBI Director James Comey for charges of making false statements to Congress and obstructing a congressional proceeding.
Both indictments have sparked concerns among many legal experts, political figures and judges who view the indictments as the Trump administration’s “weaponization” of the Department of Justice against his political adversaries.
The Trump administration also has been pursuing mortgage fraud claims against Federal Reserve Gov. Lisa Cook, based on a criminal referral from Federal Housing Finance Agency Director Bill Pulte. Trump attempted to fire Cook “for cause” over the allegations but a federal judge ruled in September that Cook could remain a voting member of the Fed Board of Governors pending an outcome in the case. The Trump administration appealed the matter to the Supreme Court.