President Trump has been all over the Federal Reserve pressuring them to lower interest rates since he took office in January. After the Fed Dropped their overnight rate a full percent the end of ’23, they’ve been on hold. Tariffs, Immigration policies, sticky inflation, soft employment… The Fed is in a difficult spot. Employment numbers have been weaker. The last Fed meeting minutes reflected most of the Governors saw inflation being the higher risk. Then again in a speech Fed Chair Powell gave at the Jackson Hole Symposium made a pivot as he conveyed tariff inflation may be short term, but not all at once, and the Fed needs to proceed carefully.
Now President Trump has made a historic and controversial move: firing Federal Reserve Governor Lisa Cook, citing “allegations” of mortgage fraud. The claim is that Cook misrepresented properties as primary residences to get better loan terms. Primary residence financing comes with lower interest rates, smaller down payments, and looser guidelines compared to investment property loans. Allegedly Cook purchased a property as owner occupied and immediately rented it out. This is a classic red flag in mortgage lending, especially now with computer systems and AI, it’s easier to get caught. Anyone in our industry and any borrower should know, that’s fraud if proven true. When a borrower falsely certifies occupancy, it not only violates the loan contract, it also undermines lender risk assessments and investor confidence.
Cook, however, denies any wrongdoing and has filed suit against the President, arguing he doesn’t have the legal authority to remove her. That legal battle will play out in real time, but it’s already raising major alarms.
The real story isn’t just about Lisa Cook. It’s about the independence of the Federal Reserve. For over a century, the Fed has been intentionally insulated from politics so it can make monetary decisions based on economics, not elections. Trump isn’t hiding his motive here he wants lower interest rates and is trying to push out Chair Jerome Powell along with Cook.
Here’s the risk, even if Trump may be correct that the Fed is behind the curve and rates should be lower… if politicians can fire Fed governors or Fed Chair at will, markets lose confidence in the Fed’s ability to act independently. And when markets lose confidence, bond investors demand more return for long-term lending.
This is where it matters to housing. The Fed can cut the overnight Fed Funds Rate all it wants, but mortgage rates don’t follow lockstep. They’re tied to the 10-year Treasury yield and long-term bond markets.
The economy, financial markets and consumer behavior is affected by perception and confidence. If bond traders believe political pressure is driving Fed policy, they price in higher inflation and risk premiums. That pushes Treasury yields up. And when Treasuries rise, mortgage rates rise… even in the face of Fed rate cuts.
So ironically, while Trump pushes for cheaper borrowing, his heavy hand could actually push mortgage rates higher for buyers, sellers, and refinancers. That’s the unintended consequence of tampering with central bank independence.
- Trump’s firing of Lisa Cook is unprecedented and legally murky.
- Cook is fighting back in court, and the decision will set a major precedent.
- Fed independence is on the line and that stability is what keeps long term borrowing costs reasonable.
- Short term Fed cuts don’t guarantee lower mortgage rates. Markets, not politicians decide where 30-year fixed rates settle.
- We don’t want either party having control over our Central Banking System. The Federal Reserve may not always make the best decisions, at the most optimal time, but I’ll put my dollar on a committee of independent economists making a logical non-bias decision over a politician any day.
After 40 years in the industry and seeing several economic cycles the lesson is clear, political meddling may create more volatility, not less. And volatility in bond markets almost always translates to uncertainty, and often higher costs in mortgage markets.
If you are in the Los Angeles area, and have any questions or real estate sales or financing needs, feel free to contact me
Ron Henderson GRI, SRES, SFR, RECS, CIAS, CREN, GREEN
President/Broker
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – Southland Regional Association of Realtors (2025)
Gov’t Affairs Chair – California Association of Mortgage Professionals (2017-2018)
Chairman – OutWest Marketing Meeting (Real Estate Education)
BRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth
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