He was able to reap financial benefits by having his California condo listed as his primary residence, as well – not to mention the fact that a senator must reside in the state he or she represents to be constitutionally qualified for the job.
Sen. Schiff signed documents claiming both the Maryland property and the Burbank condo as his primary residences, yet tax records indicate the check he used to pay his California property taxes in 2017 – the only year he paid by check – featured his Maryland address. However, California law is quite clear about the requirements necessary to qualify for the reduction in property taxes that Schiff netted via a homeowner’s tax exemption. It states "a dwelling must be the person's true, fixed and permanent home and principal establishment to which he/she, whenever absent, intends to return" to qualify. Some of the factors used to determine if someone lives in the state are the person's presence in the state, vehicle registration, voter registration, bank accounts, and state income filings.
Does paying your California property taxes with a personal check embossed with a Maryland address satisfy those bank account factors?
In July, the Fannie Mae financial crimes investigations unit sent a memo to FHFA Director Pulte, concluding that Schiff engaged in “a sustained pattern of possible occupancy misrepresentation” on home loans from 2009 to 2020.
The Little Guy Doesn’t Skate
In terms of mortgages, “misrepresentation” with intent to deceive is another word for “fraud.” And statistics show the vast majority of Americans convicted of mortgage fraud go to prison. The dollar amounts involved are much smaller than one might think.
A 2021 report from the United States Sentencing Commission found that 74.1% of mortgage fraud convictions resulted in a prison term. The numbers are interesting:
98.3% of those convicted were US citizens.
82.8% had “little or no prior criminal history.”
“The median loss for these offenses was $371,818.”
“37.7% involved loss amounts of $250,000 or less.”
“The average sentence for mortgage fraud offenders was 14 months.”
Thus, if you are not a sitting United States senator, you can go to prison for deliberate mortgage “misrepresentation” without having to oversee anything close to a multi-million-dollar grand scheme.
How close to $250,000 are we getting here?
Mortgage rates “for second homes can be 0.25% to 0.50% higher than those for a primary residence,” credit report firm Experian states. Schiff purchased his Maryland mansion in 2003 for $870,000. It has undoubtedly appreciated nicely over the years. He refinanced it in 2009, 2010, 2011, and 2012, listing it as his primary residence each time. He purchased his California condo for $298,000 in 2009.
Schiff put himself in line to save tens of thousands of dollars with the lower interest rates that came with claiming both homes as his primary residence. If it is proven that he did so via a deliberate intent to deceive, a simple question comes to mind: How many of those 37.7% of Americans convicted of mortgage fraud involving $250,000 or less did the same?
And then there is the harm caused to society at large.
“Occupancy misrepresentation” fraud has soared in the US in recent years as another housing bubble looms on the horizon. As with the 2008 housing market crash, investors seeking to flip properties are spurring the corrosive trend, which has punishing effects on all Americans seeking housing loans.
“Suspect occupancy loans” have “nearly tripled since 2020,” HousingWire reported in 2023.
GOP Rep. Ralph Norman (R-SC), a real estate developer, wrote to Pulte in April to express his “strong support” for the investigation of Letitia James. He explained how occupancy fraud harms all Americans:
“As you are well aware, mortgage fraud – particularly occupancy fraud – has a corrosive impact on our housing market. It not only distorts underwriting practices and exposes taxpayers to unnecessary financial risk but also contributes to inflated housing costs for working families who play by the rules. When public officials exploit these systems for personal gain, it sends a dangerous message that accountability is selective, and the law applies differently depending on one’s political position.”
What Norman writes of James can equally apply to the allegations hovering over Schiff.
“Evidence presented suggests that Ms. James has routinely falsified records of occupancy in multiple states. This discrepancy was not a clerical error but a calculated act – allegedly designed to secure more favorable terms under a federally backed mortgage instrument, to which she may not have been legally entitled,” Norman stated in his letter to Pulte. “If true, these actions would directly violate both federal and state mortgage fraud statutes.”
Regular Americans end up in a prison cell for such “calculated” efforts to game the system. Does the same rule of law apply to highly placed elected officials?
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