Prosecutors reviewing the mortgage occupancy fraud case against New York Attorney General Letitia James determined there is evidence that undercuts the allegations against her, according to an ABC News report based on sources.
According to a September memo summarizing the findings, any financial benefit James may have received would have been minimal — roughly $800 in the year she purchased the home. Prosecutors also noted concerns that federal mortgage guidelines for second homes do not clearly define occupancy, making it difficult to prove intent beyond a reasonable doubt.
Despite these concerns, James was indicted in early October in the U.S. District Court for the Eastern District of Virginia on one count of bank fraud. James, who denies the allegations, is due in federal court in Norfolk on Friday for arraignment.
“No one is above the law. The charges as alleged in this case represent intentional, criminal acts and tremendous breaches of the public’s trust,” U.S. Attorney Lindsey Halligan said. “The facts and the law in this case are clear, and we will continue following them to ensure that justice is served.”
The U.S. Department of Justice (DOJ) alleges that James falsely certified a Norfolk, Virginia, home as her second residence to obtain more favorable loan terms — such as a lower interest rate — while instead collecting rental income and saving more than $17,000 compared to an investment property mortgage.
James, a second-term Democrat, has denied any wrongdoing. She said any mistake in the loan paperwork was promptly corrected, and her attorney has accused the DOJ of pursuing a politically motivated case following her successful fraud lawsuit against President Donald Trump last year.
The memo cited by ABC News states that James bought the home for $137,000 in 2020 for her great-niece and her children to live in rent-free. Her great-niece confirmed she never signed a lease agreement, and the $1,350 that James reported on her taxes that year reflected utility reimbursements rather than rent.
ABC News also reported that James put down 20% — higher than the typical 10% for a second-home loan — and that the loan officer involved estimated the rate difference between second-home and investment-property financing at about $10,800 over 30 years.
If convicted, James could face up to 30 years in prison, fines of up to $1 million per count and forfeiture, although federal sentences are often below the statutory maximums.
Prosecutors briefed former U.S. Attorney Erik Siebert on their concerns last month, per ABC News. Siebert was later ousted by Trump after reportedly refusing to pursue charges against James. Halligan, who succeeded him, moved forward with the case.
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