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Key Takeaways
- Donald Trump moved to fire a Federal Reserve governor on Tuesday, accusing her of illegally listing multiple properties as her primary residence on mortgage applications in 2021.
- Primary residences typically receive lower mortgage rates because borrowers are less likely to default on payments.
- Your primary home is the address that appears on your driver’s license and tax information, and is where you receive mail.
- Life changes like marriages or job relocations can cause borrowers to inadvertently list multiple primary homes, but criminal prosecution is rare, one expert said.
The federal government would like to remind everyone that only one property can be listed as your primary residence at a time. President Donald Trump moved to fire Federal Reserve Governor Lisa Cook on Tuesday for allegedly violating this rule.
Last week, Federal Housing Finance Agency Director Bill Pulte said Cook applied for two mortgages around the same time in 2021, one in Michigan and another in Georgia, but claimed both would be her primary residences. Pulte’s accusations involve what’s known as occupancy fraud, where a homebuyer attempts to secure a more favorable mortgage rate for a second property by labeling it as their main home.
Cook has not been officially charged with mortgage fraud, and Trump’s decision to fire her may be politically motivated, given his public criticism of the Fed. Still, homebuyers should be careful when completing their applications to avoid mistakenly double-dipping on primary residences.
Tip
Pulte has initiated mortgage fraud investigations into others who have been the target of Trump’s ire, including New York Attorney General Letitia James (who prosecuted Trump and his companies for fraud) and Sen. Adam Schiff (who led an impeachment effort against Trump during his first administration).
Primary Residences Get Lower Mortgage Rates
Lenders will typically offer better mortgage rates on primary residences because they’re considered lower risk than second homes or rental properties. It makes sense: If someone is struggling to make mortgage payments, they’re more likely to stop paying off their second home first. A primary residence also comes with tax benefits, such as the mortgage interest tax deduction and capital gains exclusion.
Internal Revenue Service regulations say your primary residence must be where you reside the majority of the time. It’s the address that will appear on your driver’s license, voter registration, and tax returns. Even married couples can only have one designated primary residence, even if they had separate primary residences before or split time among multiple homes.
Careful Not To Inadvertently Commit Fraud
This can get complex in cases where married couples have to designate a primary home, or when an individual relocates for a job and takes out a new mortgage, but hasn’t sold their original home.
Situations like that play out “all the time,” according to Thomas Ravert, a financial advisor with Pathway Capital. For that reason, prosecution of mortgage fraud is rare, he added. Typically, the terms of the mortgage get reclassified to a rate in line with a secondary, rather than primary, residence.
In cases of deliberate misrepresentation, though, individuals could be subject to fines, prison time, or be required to pay the loan in full, Ravert said.
The Bottom Line
As long as homebuyers are not intentionally misleading lenders, it’s highly unlikely they’ll have to worry about committing mortgage fraud. In the event of a discrepancy, a lender will typically alter the terms of a loan to reflect the secondary home rate. President Trump (probably) won’t try to fire you, either.
