The Federal Housing Finance Agency inspector general’s office is warning last-minute budget cuts imposed by FHFA Director Bill Pulte will force the OIG to slash staff by up to 80% and discontinue the office’s longtime mission of investigating mortgage fraud.

Congressional Democrats are now calling on Pulte to resign over the move, calling it unlawful in an Oct. 1 bicameral statement.

In a Sept. 30 notification to Congress, the IG’s office said FHFA has decided to allocate $20 million for the OIG in fiscal 2027, representing a 61.3% reduction from its fiscal 2026 funding levels.

The Trump administration’s fiscal 2027 budget requested transmitted to Congress in the spring had included a $55 million funding level for the FHFA OIG.  But on Aug. 31, one month before fiscal 2027 began, FHFA leadership notified the OIG of the reduced funding allocation decision.

“Simply stated, funding at the $20 million level will eliminate our capacity to effectively conduct criminal investigation of mortgage, bank, and other fraud schemes involving the entities FHFA regulates,” James Hodge, acting principal deputy inspector general at the FHFA OIG, wrote to lawmakers in the letter.

Hodge is performing the duties of the FHFA Inspector General after the White House terminated the agency’s previous acting IG, Joe Allen, last year. His firing is among a string of 19 inspectors general fired by President Donald Trump since he retook office in January 2025.

The new funding cut would force the FHFA OIG to reduce staffing by 70-80%, resulting in the “the discontinuance of essentially all criminal investigations conducted by our Office of Investigations,” Hodge told lawmakers.

Mark Greenblatt, who served as the Interior Department’s IG and was among more than a dozen fired by Trump in January 2025, said the situation is a “five-alarm fire” for independent oversight.

“This is another unprecedented move by this administration in the evisceration of the inspector general community,” Greenblatt said.

The FHFA and its OIG are not funded through the congressional appropriations process. Instead,  the
Housing and Economic Recovery Act of 2008 stipulates that they are funded through assessments collected from regulated entities, including Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).

Hodge noted that until this past month, the FHFA has always provided the OIG with its requested allocation.

The FHFA, in a Sept. 30 news release, said the budget allocation was made to ensure the agency’s OIG was “peer-matched” to other OIGs across government.

“FHFA fully supports the independence and mission of the Office of Inspector General,” the agency wrote in the news release. “FHFA will continue to work in good faith with FHFA OIG to ensure all funds are appropriately justified.”

The agency’s news release claims that the FHFA OIG requested budget represents roughly 16% of the FHFA’s total operating budget, while the average inspector general budget allocation ratio is roughly 2%.

But Greenblatt said that was comparing “apples to oranges,” given that many IG’s offices have a much narrower mission than the FHFA OIG’s remit.

“Many of the IG’s don’t have that outward facing mission and therefore are much smaller,” Greenblatt said.

Jay Lerner, who served as IG at the Federal Deposit Insurance Corporation, agreed that OIGs such as FHFA’s have a much different mission than other offices that only focus on internal agency matters.

“It’s hard to make those apples-to-apples comparisons, because some IG offices handle more technical issues that may require specialized expertise, staffing, and resources to conduct audits and evaluations of complex financial programs, and to investigate sophisticated housing, banking, and economic crimes,” Lerner told Federal News Network.

Hodge, in his letter to lawmakers, noted that the FHFA OIG’s budget methodology is based on overseeing not just the FHFA, but also the entities that are regulated by the agency: Fannie Mae, Freddie Mac, U.S. Financial Technology, LLC (U.S. FinTech), and the 11 Federal Home Loan Banks (FHLBs).

Those entities, Hodge noted, have a combined asset total exceeding $7.8 trillion, with the FHFA OIG being the “primary law enforcement entity responsible for ensuring that mortgage fraud in this market is investigated and prosecuted.”

“Taking into account FHFA’s distinct and extensive conservatorship authority, and the enormous risks to the U.S. financial system inherent in the operations of the regulated entities, OIG’s benchmark for staffing and funding is not, as is the case with most federal OIGs, based on a ratio to the staffing and budget of the parent establishment, FHFA,” Hodge wrote.

Historically, Hodge wrote that the IG’s office had applied a budget formulation of about 1% of the combined operating budgets and staffing of those entities, along with the FHFA. In recent years, the ratio of the OIG’s budget benchmark has fallen “substantially below 1% without having a significant adverse effect on our operational capacity,” Hodge wrote.

The office’s special agent cadre has numbered “around 40 agents” in recent years, along with three Special Assistant United States Attorneys who prosecute mortgage fraud and other crimes.

Hodge said the IG office’s criminal enforcement program has resulted in more than 1,270 convictions and nearly $75 billion in “monetary results” since 2011.

But under the budget cuts pushed by Pulte, the FHFA IG’s office will have to end support to ongoing criminal investigations “as soon as feasible,” as well as cease efforts to support the Justice Department’s National Fraud Enforcement Division, according to Hodge.

Hodge said the IG’s office has now begun the process of implementing a reduction-in-force.

He wrote that the IG’s office will also terminate its criminal investigations program and cut staff within the Office of Investigations to “the minimum amount of personnel necessary to conduct investigations limited to the conduct of FHFA personnel, which historically have been exclusively administrative in nature, and maintain our statutorily required hotline.”

In an Oct. 1 letter to Pulte, Democrats on the Senate Committee on Banking, Housing and Urban Affairs demanded that he reverse course and institute a budget in line with the FHFA OIG’s request.

“Your decision is unacceptable and yet another example of this administration’s willingness to flout the law and evade accountability,” they wrote. “It also indicates that FHFA is uninterested in finding and eliminating mortgage fraud – an issue that you have repeatedly claimed to prioritize at FHFA.”

In addition to firing IGs, the Trump administration has also taken aim at the Council on Inspectors General for Integrity and Efficiency (CIGIE). The Office of Management and Budget last September announced it would not apportion funding for CIGIE, before reversing course and releasing some funding for the council’s activities.

“They’re clearly taking unilateral action where they can and that to me sets a very troubling precedent,” Greenblatt said.

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