Let’s not waste time. The New York Attorney General getting indicted in Virginia over a 2020 mortgage “occupancy” line item is not some great crusade for financial integrity. It’s politics dressed up as paperwork. I read the statutes. I read the indictment. I know how lenders work. And I sell real estate for a living — 25 years, thousands of homes, every flavor of mortgage and rider you can imagine. This case is overreach.
What they’re claiming (in plain English)
Prosecutors say Letitia James told a lender the Norfolk, VA house would be a second home, signed the standard rider, then rented it. Because the “second home” box usually gets better pricing, they’re claiming she “defrauded” a bank and “influenced” a lender with a false statement. The number floating around is sub-$20,000 in lifetime advantages. That’s their big crime story.
Let me translate that for people who don’t live inside a DA’s office: they’re trying to convert a garden-variety, often-confusing occupancy designation into a 30-year felony. Not a pattern of straw buyers. Not a ring of bogus appraisals. Not a forged W-2 mill. A checkbox and how someone used a property later.
Why it’s prosecutorial overreach
- Intent is doing all the work here. For bank fraud, the government needs a knowing scheme to defraud or to get bank money “by means of” the lie. That means the misstatement has to be the mechanism that made the bank part with its funds. In real life, lenders qualify these loans on full files: credit, assets, income, reserves, ratios. A minor occupancy delta doesn’t “cause” the wire by itself.
- No real-world harm to the bank. Was there a default? A loss? A repurchase demand from the investor? If you’re going to scream “fraud,” show me the damage. Otherwise, this is a paperwork fight that belongs in underwriting, not in a federal courtroom.
- Occupancy is a moving target. Life changes. You buy as a second home, you end up renting. You rent, then move in. Lenders know this; that’s why riders prohibit intentional misrepresentation — not normal, post-closing life. The question is what you intended at the time of the application, and proving someone’s internal state years later is not the slam dunk Twitter thinks it is.
- Selective thunder. I’ve watched lenders and insurers quietly re-rate, re-paper, or assess a fee when they think a borrower’s use changed. I’ve almost never seen criminal bank-fraud charges for a one-off occupancy dispute on a conforming-sized loan. If this wasn’t Letitia James, it’s a letter from the servicer, not a perp walk.
What a jury will actually hear
Prosecutors will wave around the Second Home Rider and say, “See? Promise to occupy. Then she rented.” Defense counsel will say, “At application, intent was bona fide; circumstances changed. And even if you dislike the decision, show how this statement was the but-for cause of any bank loss or even the bank’s decision. Show materiality that isn’t just theoretical.”
Juries aren’t stupid. They know the difference between a paperwork dispute and a con.
This is why this case sets off alarms
- The forum. Eastern District of Virginia is famous for speed, not for being the natural venue for New York statewide officials over routine loan files.
- The scale. We’re not talking about a $5M cash-out with phony tenants and cooked leases. We’re talking about a normal-sized mortgage with a marginal pricing edge that the bank happily booked and has, as far as we can tell, been paid on time.
- The timing. After years of James aggressively prosecuting high-profile fraud cases, suddenly she becomes the target over a technical mortgage point? Spare me.
The “real estate” reality nobody in the press wants to explain
Every week, my team watches lenders re-price files by eighths of a point over tiny parameters: LTV, FICO buckets, occupancy, condo vs. co-op, loan size. Borrowers don’t compute lifetime amortized dollar differences; banks do. If a file’s otherwise pristine — great income, big reserves, strong credit — it funds. If the bank later thinks the borrower misunderstood the occupancy rule, they have remedies that aren’t felony indictments.
If you want to stop genuine mortgage fraud, here’s what it looks like in the wild:
- Identity theft / straw buyers
- Forged income / asset paperwork
- Inflated appraisals coordinated with insiders
- Serial bust-outs across multiple lenders
You don’t need a microscope to find those. You need a broom.
Bottom line
This prosecution stretches bank-fraud theory to make an example out of a political figure. It takes an underwriting question better handled by policy and civil remedies and upgrades it to a federal crime because the target is famous. That’s not rule of law; that’s theatrics.
You want consistent justice? Then we don’t criminalize nuances we usually cure with a servicing letter and a fee — and we don’t pretend a checkbox outranks 40 pages of strong borrower qualifications.
I’ve said this for years: if the government wants to police occupancy, write clearer riders, enforce them uniformly, and keep criminal charges focused on actual schemes. Until then, this case reads like a headline hunt, not a safeguard of the banking system.
