FILE PHOTO: Lisa Cook testifies before a Senate Banking Committee hearing on her nomination to be a member of the Federal Reserve Board of Governors (for a second term), on Capitol Hill in Washington, U.S., June 21, 2023. REUTERS/Jonathan Ernst/File Photo

(Reuters) -U.S. President Donald Trump says he is removing Federal Reserve Governor Lisa Cook for "cause," citing what he said were "false statements" on two mortgages she took out in 2021, about a year before the Senate confirmed her appointment to the Fed.

The thrust of Trump's accusation - first made public by Federal Housing Finance Agency Director William Pulte in a criminal referral to Attorney General Pam Bondi's office - is that Cook misrepresented her residency status for the loans, claiming both as her primary residence. Pulte says he also referred a third property to the Department of Justice as well.

Cook has sued Trump and the Fed, saying the Republican president's unsubstantiated claim she engaged in mortgage fraud before taking office did not give him legal authority to remove her, and was a pretext to fire her for refusing to lower interest rates

Here is what is known, and not known, about the mortgages.

PROPERTIES

Cook's annual financial disclosure, filed with the U.S. Office of Government Ethics, shows one mortgage for an investment property and two mortgages for personal residences. All were dated 2021, when the Georgia native was a professor at Michigan State University and before her May 2022 confirmation by the Senate to the Fed Board of Governors.

The loans were originated a little more than a year into the COVID-19 pandemic when interest rates had plunged due to the Fed's efforts to support the economy during the health crisis. Tens of millions of homeowners refinanced existing loans or obtained new mortgages during that period.

TWO 'PRIMARY' RESIDENCES, ONE 'INVESTMENT' PROPERTY

Cook's mortgage paperwork does identify two different properties as her primary abodes.

A public records search identified a $203,000 mortgage in Cook's name in Washtenaw County, Michigan, dated June 18, 2021, and a $540,000 mortgage, also in her name, in Fulton County, Georgia, dated July 2, 2021. The mortgages were originated by the University of Michigan Credit Union for the Michigan property and Bank Fund Credit Union for the Georgia property.

Spokespersons for the two credit unions did not reply to requests for comment.

Documentation for both contains an identical occupancy clause that requires the borrower to, within 60 days, "occupy the property as borrower's principal residence for at least one year after the date of occupancy."

Cook also took out a $361,000 mortgage, originated by Bank Fund Credit Union, for a condo in Cambridge, Massachusetts, on April 7, 2021, Middlesex County records show. The Cambridge property has a "second home" rider that requires it be held primarily for use by the owner and not regularly rented out.

All three mortgage documents specify that the occupancy requirements stand "unless lender otherwise agrees in writing, which consent shall not be unreasonably withheld, or unless extenuating circumstances exist which are beyond borrower's control."

It is not known if Cook obtained such an agreement, if there were extenuating circumstances, or whether or for how long she occupied any of the properties.

WHY DOES IT MATTER?

Mortgages obtained for primary residences and second homes can come with cheaper financing than those for investment properties, which have a higher default rate and are typically subject to tighter underwriting by lenders.

A study published in 2023 by the Philadelphia Fed found indications of occupancy fraud - misrepresenting a property as owner-occupied when it is used as a rental property - in 3% of mortgages from 2008-2017. It was not known if Cook's properties were intended to be owner-occupied.

"The real question to ask here was, was there any misleading of lenders," Cornell University Law Professor Robert Hockett said. "If the lenders knew... and they were able to factor that in in order to risk-price the lending, then that's above board."

THE BORROWING RATES

In fact, the mortgage rates Cook obtained were higher than the prevailing national averages at the time. It is not known when Cook locked in her mortgages, but typically borrowers fix their rate a month or two before the purchase.

Cook's financial disclosure shows one personal residence mortgage of $100,001-$250,000. Though the address is not specified, it is the same 15-year borrowing term as on her $203,000 Ann Arbor, Michigan, mortgage.

From the beginning of April to early July, the national average for the 15-year rate ranged from 2.23% to 2.45%.

Cook's rate was 2.875%.

Her financial disclosure identifies a second loan for a personal residence for $500,001-$1 million. Again the address is not listed but the value and term of the loan matches her $540,000 mortgage on her Atlanta, Georgia condominium.

The national average for a 30-year fixed-rate mortgage ranged from 2.93% to 3.04% from April 15, 2021 to July 1, the day before she signed the mortgage, Freddie Mac data shows.

Cook's rate was 3.25%.

Cook identifies a third mortgage of $250,001-$500,000 as an investment/rental property with a 15-year term that matches her $361,000 mortgage on her Cambridge, Massachusetts, condo. The national average for that term ranged from 2.19% to 2.45% in the two months before she signed the mortgage.

Cook's rate was 2.5%.

Fraud, Cornell's Hockett said, is generally "either affirmatively misrepresenting, or failing to disclose...such as to lead someone into taking a risk they wouldn’t otherwise risk, or give you something other than they would otherwise give you...the very fact that they didn't give her an advantageous rate suggests they were informed."

WHY THOSE CITIES?

Public records show that Cook first bought the Ann Arbor home in 2005, when she first got her job as a professor at Michigan State University in nearby East Lansing, and indicate that the 2021 mortgage was a refinance. MSU transitioned to remote teaching during the COVID-19 pandemic starting in March 2020, and returned to mostly in-person teaching in the fall of 2021.

Cook was born in Georgia and graduated from Spelman College in Atlanta. It is not known when or for how long she lived in Atlanta. Cook taught at Harvard University in Cambridge, Massachusetts from 1997 to 2002.

(Reporting by Ann Saphir; Editing by Dan Burns and Chizu Nomiyama)