WASHINGTON — The Federal Housing Finance Agency plans to cut its inspector general’s fiscal 2027 budget to $20 million from an initially planned $55 million, prompting warnings that the reduction would cripple fraud investigations and calls from congressional Democrats for Director Bill Pulte to resign.
Acting Inspector General James Hodge told the Senate Banking Committee that the reduction could force cuts of 70% to 80% of his office’s staff and sharply limit its ability to investigate fraud involving entities regulated by FHFA, Yahoo Finance reported.
“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,” Hodge wrote in a letter, according to Yahoo Finance.
Hodge said he learned of the planned cuts Aug. 31. Since 2011, the office’s criminal enforcement program has secured more than 1,270 convictions and nearly $75 billion in restitution, according to figures cited in the report.
Agency Defends Reduction
Pulte defended the decision on X as “good financial stewardship to align our IG’s office with its Peer IG Offices,” Yahoo Finance reported.
In a separate statement, FHFA said the inspector general’s funding request represented 16% of the agency’s operating budget, compared with an average of about 2% for federal inspector general offices.
The agency also said the watchdog’s staff amounted to 18% of FHFA’s overall staffing, compared with an average of about 4% for other inspector general offices.
FHFA said the reduction reflected its responsibility to spend resources efficiently while meeting its legal obligations.
The Counter-Argument
Hodge countered that his office’s responsibilities differ substantially from those of a typical financial regulator’s watchdog because FHFA serves as conservator and supervisor of Fannie Mae and Freddie Mac and oversees the 11 Federal Home Loan Banks.
That work includes examining significant risks to the U.S. financial system posed by the regulated entities, he said.
FHFA and its inspector general are funded through assessments on regulated entities rather than the usual congressional appropriations process. The inspector general’s office received $55 million in 2023, $57 million in 2024 and $58.5 million in 2025, Yahoo Finance reported.
Democrats Demand Answers
Eleven senators on the Banking Committee, led by ranking Democrat Elizabeth Warren of Massachusetts, challenged the reduction in a letter to Pulte.
“You must publicly answer to Congress about your attempt to gut your agency’s independent watchdog,” they wrote.
Warren, Sen. Chuck Schumer of New York, House Minority Leader Hakeem Jeffries of New York and Rep. Maxine Waters of California, the top Democrat on the House Financial Services Committee, also issued a joint statement calling for Pulte’s resignation.
The Democrats accused Pulte of weakening the office responsible for investigating his conduct and alleged that he had used private mortgage information to pursue investigations of President Donald Trump’s perceived political opponents, according to Yahoo Finance.
