The Federal Housing Finance Agency, led by Trump appointee Bill Pulte, withheld records and information from its own internal watchdog during at least three separate evaluations, according to an inspector general report sent to lawmakers Friday. The report, prepared earlier in October by the FHFA Office of Inspector General, describes the obstruction as unprecedented and says it came right before the agency slashed the watchdog's funding.
The findings, detailed by Reuters reporters Marisa Taylor and Chris Prentice, allege that FHFA interfered with the inspector general's independence and blocked oversight of Fannie Mae and Freddie Mac. One of the stalled evaluations reportedly involved FHFA's oversight of a multifamily-loan lender that defaulted in June 2024. FHFA oversees the Federal Home Loan Banks along with Fannie Mae and Freddie Mac, which have been under the agency's direct oversight since the 2008 financial crisis and underpin the U.S. housing market by backing the majority of American mortgages.
FHFA has pushed back hard on the allegations. A spokesperson for the agency called the inspector general's claims incorrect and said FHFA readily produced information and cooperated with the watchdog, according to the same Reuters report. The agency also said it respects the inspector general's independence and role, even as the report says FHFA refused to provide records and ultimately obstructed congressionally mandated reviews of its oversight responsibilities.
Cooperation Claims Clash With Watchdog's Account
FHFA staff say they completed 56 document requests and attended 16 separate hour-long meetings tied to three recent reviews, per the Reuters account, framing the agency's engagement with the inspector general as substantial. The inspector general's office, however, says that engagement fell short of its legal entitlement to access all records. The report marks the first instance in at least a decade that the office has flagged FHFA interference with its independence, Reuters reports.
Tensions between the agency and its watchdog had appeared to ease earlier this year. The inspector general and FHFA reached an understanding about the office's oversight role in mid-August, but roughly two weeks later FHFA notified the inspector general it was drastically reducing the office's funding, according to Reuters. The inspector general's general counsel had tried to convince FHFA to cooperate by documenting its congressionally mandated responsibilities, the report says, before the funding notice arrived.
Budget Cut Forces Staff Reductions
The numbers behind that funding cut are stark. FHFA allocated $20 million to its inspector general's office for fiscal 2027, a 61.3% reduction from fiscal 2026 levels, according to Federal News Network. That figure falls well short of the $55 million the Trump administration's own fiscal 2027 budget request had proposed for the office.
Acting Principal Deputy Inspector General James Hodge told lawmakers this month that the cuts would force the office to reduce staffing by 70% to 80% and would eliminate its capacity to effectively investigate criminal mortgage, banking, and other fraud schemes involving entities FHFA regulates, the outlet reported. Hodge's office said it would discontinue essentially all criminal investigations conducted by its Office of Investigations and has already begun implementing a reduction-in-force. Inspector general employees were told as much as 80% of staff, roughly 80 people, would be cut, per Reuters, and staff have reportedly received furlough notices and instructions to prepare for reductions.
FHFA has defended the cuts by saying they bring the inspector general's office into line with its peers across government, telling Federal News Network the move was meant to ensure the office was “peer-matched” to other inspectors general. The agency separately said the office's prior budget and headcount were outsized compared with other regulators, according to Reuters. Inspector general leaders have discussed ways to stave off the mass job cuts with lawmakers, the wire service reports.
A Track Record Now at Risk
The office's past work carries weight behind the warnings. Since 2011, the FHFA inspector general has produced more than 1,270 convictions and nearly $75 billion in monetary results, per Federal News Network, while overseeing entities with a combined asset total exceeding $7.8 trillion. The inspector general's report calls the funding cuts an extreme escalation of FHFA's challenge to the office's authority and independence, warning that abrupt reductions would prevent meaningful oversight of the agency.
This is not the first leadership shake-up at the watchdog's office. FHFA ousted its previous acting inspector general after the White House terminated Joe Allen last year, Federal News Network reported, after which Hodge assumed acting duties. Reuters separately reports that FHFA drove out hundreds of employees from the regulator and its government-backed mortgage businesses, and that the agency helped lead efforts to target perceived presidential enemies, including Federal Reserve Governor Lisa Cook and New York Attorney General Letitia James, both of whom have denied wrongdoing. Pulte, who was confirmed as FHFA director in March 2025 and appointed himself chairman of both the Fannie Mae and Freddie Mac boards that same month, has defended the allegations against Cook and James as part of efforts to root out mortgage-market fraud.
Part of a Wider Pattern Across Federal Watchdogs
The clash at FHFA fits a broader trend documented by the Partnership for Public Service, which found the administration's fiscal 2027 budget proposal would cut Cabinet department inspector general appropriations by an average of 12% relative to 2024 levels, with reductions reaching 28% at the Interior and Justice departments and 21% at Commerce. The Justice Department's inspector general office alone is projected to lose more than 140 employees. The nonprofit also reported that the administration fired at least 17 presidentially appointed inspectors general in 2025, leaving more than 70% of Senate-confirmed inspector general positions vacant, and that average Cabinet department inspector general staffing fell 10% in President Trump's first year before an additional projected 9% decline that would leave offices nearly 20% smaller than before his administration.
The Congressional Research Service has noted that inspectors general draw their independence from provisions of the Inspector General Act, including appointment based on integrity and ability regardless of political affiliation, independence in staff selection, and transparency around their budgets. The agency has separately observed that recent personnel actions involving inspectors general have raised questions about whether they can still operate with the independence Congress intended. For now, the fiscal 2027 funding figures remain a proposal rather than a final appropriation, since Congress ultimately determines inspector general funding levels, according to the Partnership for Public Service.
