News and Insight

For the Weekend of September 13^th, 2025

Hawaii’s Most Read Mortgage, Real Estate, and Finance Publication for 18 Years

 

Volume 18 – Issue 2

Calling Balls and Strikes

The most common form of fraud found in the mortgage industry today relates to occupancy.  I know firsthand how some consumers will do anything to fool the underwriter to get a better owner-occupant rate versus a higher second-home or investor rate.  My goal with this newsletter has always been to educate those that wish to read it.  It is with this goal of education that I recently wrote about prominent individuals that had been referred to the Department of Justice for committing mortgage fraud.

 

I received several comments from long-time readers that were critical because the 3 people I wrote about were all Democrats.  I replied to every comment personally.  I also pledged that if any Republicans did the same, I wouldn’t hesitate to call them out as well.  I must go back to the reason why I wrote about them in the first place.  It wasn’t to play politics and point fingers at one side or another.  It was to expose the fraud that others have committed; to educate someone out there reading this newsletter - thinking they might try the same thing (please pass this along to others as well).

 

My promise has and always will be to call balls and strikes - regardless of party affiliation.

 

One of the readers responded and wondered if I had seen an article in ProPublica claiming 3 current Trump cabinet members are guilty of the same things Schiff, James, and Cook are accused of doing.  I read the article, and as I noted in last weekend’s newsletter, I am writing from the perspective of someone currently originating loans and has been an active originator for almost 30 years.  With that in mind, I will address each of the 3 people named and review why they have not been referred to the DOJ.

 

 

 

 

 

Before I get into the details of each case, I do need to call out the publication and the authors of the article for writing some things that I found outrageous, inaccurate, and mostly bends the truth to achieve a supported narrative.

 

“Real estate experts say claiming primary residences on different mortgages at the same time is often legal and rarely prosecuted.”

One cannot apply for two primary residence mortgages at the same time.  That is fraud.  And that fraud is rarely discovered, which is why it is rarely prosecuted.  One can also have owned a home for years that had a primary residence mortgage, then buy and move into a new home with a new primary residence mortgage.  Yes, the borrower has two loans with the same designation, but there’s no crime.  You are not required to refinance that original mortgage if you convert it into a rental after the initial occupancy period.

 

“In interviews, real estate lawyers said that mortgage lenders are typically well aware of their clients’ other loans and sometimes even encourage the primary-residence language for second homes.”

This is blatantly false.  Falsifying residency is fraud.  No lender will encourage a borrower to commit fraud and be a party to that fraud.

 

“…innocent mistakes are common: Homebuyers simply sign stacks of forms without reading them.  Few consumers understand this issue, and if there is someone at fault here, it is likely the loan officer who likely advised them to sign up for this loan that obviously wasn’t for their primary residence.  Loan officers who are competing for business will often quote lower rates in order to get a customer’s business.”

Mistakes are made, and yes, a consumer does sign a lot of documents at closing.  But in the case of Schiff, James, and Cook, these individuals are not the average working-class borrower with little more than a high school education.  Schiff and James are lawyers, and in Cook’s case, she’s an economist who is one of seven members of board of the most powerful financial organization in the world.

The second part blaming loan officers for initiating the fraud is ridiculous.  The loan originator can’t simply code the mortgage application as a primary residence, and everything falls into place from there.  Underwriters review the documents submitted and scrutinize the application to make sure the story makes sense.  To do that, the borrower is required to provide evidence that the occupancy is accurate.  No borrower buying a second home or investment property comes to the signing table at closing and is surprised that they magically obtained a primary residence loan.

 

 

Let’s dive into the 3 Trump cabinet members and honestly examine what they are accused of.

 

 

Transportation Secretary Sean Duffy and his wife Fox News host Rachel Campos-Duffy:

The article claims that this couple owns two homes, each with a primary residence (owner-occupant) mortgage.

 

In 2021 Duffy and his wife purchased their primary residence in New Jersey.  They applied for and received a primary residence mortgage and corresponding rate.

 

In 2025, when Duffy was confirmed as Transportation Secretary, the couple purchased a new primary residence in a suburb of Washington D.C.  They applied for and received a primary residence mortgage and rate.  The Duffy’s moved into their new home and currently live there.

 

Yes, the Duffy’s own two homes, and each has a loan designated as an owner-occupant mortgage.  But there is no fraud, nor bending of any mortgage rules.  If you have a primary residence mortgage on your owner-occupied home, and decide at some future date to buy and move into another primary residence, while still retaining that original property for personal use or converting it into a rental, you are not required to refinance that original property with a new mortgage.

 

You an legally own more than one home that has an owner-occupant mortgage.  The difference is that you cannot buy two properties at the same time and claim each to be your primary residence.

 

 

EPA Secretary Lee Zeldin:

Again, the article makes the same claim of Zeldin holding two properties, each with an owner-occupant primary residence mortgage.

 

In 2007 Zeldin purchased his primary residence in Long Island, New York.  He was a congressman for that district.  In 2022 he ran for Governor of New York and lost.

 

In 2024 Zeldin was one of the first cabinet appointees nominated by Trump after the November election.    Zeldin and his wife purchased a home that is walking distance from the EPA headquarters and moved to Washington D.C.  Like Duffy and his wife, they applied for and received a primary residence mortgage and rate.  Currently Zeldin and his wife own two homes, each with a primary residence, owner-occupant mortgage.

 

Again, there is no fraud or any attempt to game the system.  This is totally legal and available to any person with the same circumstances.

 

 

Labor Secretary Lori Chavez-DeRemer:

In January of 2021, the former mayor of Happy Valley, Oregon, Chavez-DeRemer and her husband refinanced their long-held primary residence in Oregon.  Two months later, the couple decided to retire to Arizona and live on a golf course fronting home.  They applied for and received a primary residency, owner-occupant mortgage and rate for that new home.

 

Prior to moving into the home, Chavez-Remer decided to run for congress for a seat that had just opened up in her home state of Oregon.  She did not formally move into the home.  She did win the election.

 

Is Chavez-DeRemer guilty of mortgage fraud?  If she was knowing of her decision to remain in Oregon and bought the Arizona home falsely claiming owner-occupancy, then she is.  That’s a hard one prove in court, because one must prove the borrower’s intent to defraud.

 

I am not going to make any excuses or sugar-coat this transaction, but it does bring up content that is valuable to the conversation.  Circumstances do change in people’s lives.  I had a transaction 17 years ago where I financed an owner-occupant purchase of an individual that worked for a fortune 500 company.  He was transferred to Hawaii to run their operations here.  A month after he closed on his home, a position opened up in a bigger market.  It meant a promotion and more money.  He obviously took the job and moved.  He loved the home he purchased and wanted to retain it to use someday.  In the meantime, he would use it as a rental.  But before he formally took the job, he called me to ask about his owner-occupant mortgage.  He wanted to know if he was now required to refinance the mortgage he just closed on, into an investor loan.  The answer was no.  While he did sign an form stating he would live in that home for one year, because hiss circumstances changed, no fraud was committed.

I have had clients that purchased a condo here as a second home and signed an agreement stating they would not rent it out.  Unfortunately, their financial circumstances changed.  In one case, the borrower lost their job.  In another, one of the wage-earning spouses unfortunately passed away.  In each case, this drastically changed their financial ability to keep the property vacant and solely for personal use.  Each decided to rent out the unit in order to avoid foreclosure.  Did they commit fraud?  No!

 

 

In wrapping up the controversy over which political party’s people committed mortgage fraud, here is what I said to one critic of what I had previously written.  In our highly charged and fractured political world right now, too many people rely on partisan news sites that only provide them with the news they want to hear.  People do things that are illegal.  Some eventually get caught.  It is unfortunate that in today’s world if fraud is exposed, the defense is “what about the other side?”  Why not accept that in every barrel there’s some bad apples?  If we collectively weeded out the bad apples from each barrel, we’d all have better tasting apples.

 

 

<< A Late Development as of Saturday 9/13/2025 >>

 

Reuters released a story today: Exclusive: Fed Governor Cook declared her Atlanta property as “vacation home,” documents show

 

The article claims the news service has seen firsthand the initial Loan Estimate issued by Ms. Cook’s lender, a federal credit union, that clearly shows the transaction was for a 2^nd Home, and not as her primary residence.  The assertion is that something beyond Ms. Cook’s control happened that changed the transaction from the 2^nd home designation to owner-occupant in the end.

 

There is something funny going on here, and I’m not sure who the culprit is.  As I carefully read the article I put on my loan originator hat to look for clues.  I had a feeling, but I had to research it myself.  What I found is very important and something everyone needs to be aware of.

 

The old Good Faith Estimate (GFE) form was retired in 2015.  It was replaced by what’s known as the Loan Estimate (LE) – all part of the TILA-RESPA Integrated Disclosure (TRID) Rule.  This new form carries significant protection for the consumer to ensure the borrower is not taken advantage of by unscrupulous mortgage people.

 

With the old GFE, lenders would routinely lowball fees to sway borrowers to utilize their services.  When the borrower got to the closing and saw huge changes in fees, there was nothing the borrower could do, except cancel and move to another lender (something that rarely happened).  With the new LE, that initial form is your guaranty that the fees listed will remain true through closing – unless there are material changes in the structure of the loan (such as loan amount or appraised value).

 

What I have seen since 2015 are lenders issuing “itemized fee forms” to consumers, and not the official Loan Estimate.  By law, you are required to have an LE issued by the lender you have applied to.  No other form is a legal substitute.  Why the fake forms?  Because of the fee guaranty.  If you get something other than an official LE from a lender, realize they are not playing by the rules.

 

So how does all of this relate to the Loan Estimate Reuters refers to in their article?

 

The official Loan Estimate doesn’t list the occupancy.  I have no idea what form Reuters is referring to, but occupancy is not a field on the official the Loan Estimate form the lender is required to issue and keep in the applicant’s file.

 

I wish the authors of the articles written about the mortgage industry did their research and sought out independent, honest, and knowledgeable industry experts before exploding the internet with stories that will feed those looking for validation of their political beliefs.

 

And if you don’t want to believe me, here’s the top of the LE form.  There’s nothing listing occupancy.  Occupancy is also nowhere else on the 3-page form.

 

 

 

 

And now the week’s economic news…….

 

Favorable Inflation Reports

The two important inflation reports released this week were on balance weaker than expected.  As a result, mortgage rates remained near the lowest levels of the year.

 

The Consumer Price Index (CPI) is one of the most closely watched inflation indicators released each month.  Since it excludes food and energy prices, which are prone to short-term volatility, investors tend to focus on core CPI to get a clearer sense of the long-term inflation trend.  In August, Core CPI rose 0.3% from July, matching the consensus forecast.  It was 3.1% higher than a year ago, the same as last month and the highest annual rate since February.

 

Another significant inflation indicator released this week, which measures costs for producers, came in far below the expected levels.  The August core Producer Price Index (PPI) declined 0.1% from July, while the consensus forecast called for an increase of 0.3%.  This followed a shockingly large increase of 0.9% last month, however, leading some economists to suggest that tariffs have increased the monthly volatility in this data.  In any case, Core PPI was 2.8% higher than a year ago, down sharply from an annual rate of 3.7% last month, which was the highest level since March.  Both CPI and PPI remain well above the 2.0% target level of the Fed.  Of the two major inflation reports, investors tend to place less weight on PPI, since it reflects a smaller slice of the economy than CPI.  Following the latest inflation data, investors now anticipate that the Fed will reduce the federal funds rate by 75 basis points over the remaining meetings this year.

 

On Thursday, the European Central Bank (ECB) held benchmark interest rates unchanged at 2.0%, down from a record high of 4.0% in the middle of 2023.  This move was widely anticipated, and the reaction was minor.  In its meeting statement, the ECB said that the outlook for inflation remains "more uncertain than usual" due to trade disputes, while the risks to economic growth are more balanced than at the last meeting.

 

Lower rates were good news for mortgage applications this week, according to the Mortgage Bankers Association (MBA).  Refinance applications rose 12% from last week and were 34% higher than one year ago.  Purchase applications increased 7% from the prior week and were up 23% from last year at this time, at the highest level since July.

 

 

 

 

Next Week

Looking ahead, the next Fed meeting will take place on Wednesday.  Most investors expect that the Fed will lower the federal funds rate by 25 basis points, but some anticipate a larger 50 basis point reduction.  For economic reports, Retail Sales and Import Prices will be released on Tuesday.  Since consumer spending accounts for over two-thirds of U.S. economic activity, the retail sales data is a key measure of the health of the economy.  Housing Starts will come out on Wednesday.

Until next week….

 

*** Please note that Freddie Mac publishes their weekly rate report on Wednesday mornings from data received Monday and Tuesday. 

The graph above is intended to shown rate trends, and not “today’s current rate”. ***

 

 

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