The federal agency that oversees Fannie Mae and Freddie Mac is accused of withholding information from the independent office Congress established to investigate its conduct.
On Friday, October 30, Reuters reported that the Federal Housing Finance Agency (FHFA), led by Trump appointee Bill Pulte, refused to provide records needed for at least three evaluations by its Office of Inspector General.
The allegations came from the watchdog’s own report, prepared earlier in October and delivered to Congress on Friday. The report described the interference as unprecedented.
The agency disputes the allegations. But the disagreement over access to records is only part of the problem. FHFA has also cut the inspector general’s budget so deeply that the office says it will have to abandon much of its investigative work.
What was the watchdog trying to investigate?
The Federal Housing Finance Agency supervises Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. These institutions play an enormous role in keeping mortgage financing available to American homebuyers and supporting the nation’s housing market.
Congress established an independent inspector general to investigate fraud, waste, abuse, and oversight failures involving the agency and the institutions it regulates.
One of the disputed evaluations involved FHFA’s supervision of a lender associated with multifamily mortgage loans that defaulted in June 2024. Multifamily loans finance apartment buildings and other residential properties containing multiple housing units.
The inspector general wanted to examine how FHFA had supervised the lender. According to the report Reuters reviewed, the agency withheld records and information needed for that evaluation and at least two others.
This does not establish wrongdoing by the lender or prove that FHFA mishandled the loans. Those are questions an independent review is supposed to help answer.
The dispute concerns whether the watchdog can obtain the information necessary to do that work.
Under the Inspector General Act, federal inspectors general have a statutory right to timely access to agency records relevant to their responsibilities. That authority exists so officials running an agency cannot decide which aspects of their performance receive independent scrutiny.
FHFA says it has cooperated. An agency spokesperson told Reuters that staff fulfilled 56 document requests and participated in 16 separate hour-long meetings involving three recent reviews.
Those figures show the agency provided at least some cooperation, but they do not establish whether it produced the specific disputed records.
The unanswered question is what information the inspector general requested, why FHFA withheld it, and whether the agency had a lawful basis for doing so.
Then came the budget cuts
The conflict over records was already underway when FHFA took another consequential step.
In late September, the agency reduced the inspector general’s fiscal 2027 budget to $20 million, more than 60 percent below its previous operating budget.
Acting inspector general James Hodge warned Congress that the reduction would require eliminating approximately 70 to 80 percent of the office’s staff.
He also warned that the office would have to discontinue essentially all criminal investigations involving mortgage fraud and other misconduct within its jurisdiction.
FHFA defended the reduction as an effort to bring the watchdog’s spending and staffing into line with comparable offices at other regulators. Pulte has characterized the dispute as a matter of responsible financial management.
Government agencies can legitimately review expenditures and seek savings. The question here is what happens when those savings remove the personnel needed to perform duties Congress assigned to an independent office.
According to Reuters, the inspector general’s legal staff had previously tried to resolve the records dispute by explaining the office’s statutory authority. The two sides appeared to reach an understanding in mid-August.
Two weeks later, FHFA notified the watchdog of the substantial funding reduction.
The timing does not establish that the cuts were retaliation for the records dispute. But it means the inspector general now faces two problems at once: obtaining the records necessary for its reviews and retaining enough investigators to conduct them.
Congress has been warned. What has it done?
The inspector general has taken the dispute outside the agency.
Hodge notified Congress about the budget cuts in late September. The October 30 report added the allegations that FHFA had interfered with the office’s access to information.
Congressional Democrats have responded through formal oversight requests.
On October 1, Democratic members of the Senate Banking, Housing, and Urban Affairs Committee demanded that Pulte reverse the funding reductions.
On October 5, eleven Democratic senators on the committee asked Chairman Tim Scott, a South Carolina Republican, to hold a hearing at which Pulte could explain his decisions.
Senator Elizabeth Warren has also questioned FHFA’s cooperation with a separate watchdog, the Government Accountability Office, concerning information requested for congressional investigations.
These are identifiable oversight efforts. Lawmakers have demanded explanations, requested testimony, and placed their concerns in the congressional record.
But those actions have an important limit.
As of October 31, there is no verified public evidence that FHFA has restored the inspector general’s funding, supplied the disputed records, or resolved the objections raised in the new report. No Senate Banking Committee hearing addressing the new allegations has been verified.
The inspector general has made the problem visible to Congress. The available record does not establish that Congress has secured a remedy.
What happens next?
Congress created the inspector general’s office and has the authority to investigate FHFA’s compliance with federal law.
The Senate Banking Committee can hold oversight hearings, request testimony and records, and examine the agency’s decisions. Lawmakers can also pursue legislation addressing the office’s funding and oversight authority.
Whether any of those measures will occur remains uncertain.
For Kentucky residents, the issue is connected to the same national mortgage system that helps finance homes, rental properties, and housing development across the Commonwealth. This dispute has no documented Kentucky-specific consequences.
The immediate stakes involve oversight of an institution with substantial responsibilities nationwide.
One specific opportunity for public participation remains. The Senate Banking Committee has already received a formal request for a hearing. Residents who want the allegations examined can call the committee at 202-224-7391 and ask Chairman Scott to schedule public testimony concerning the withheld records and the inspector general’s funding.
A hearing would require the agency’s leadership to answer questions publicly and give senators an opportunity to examine the competing accounts.
For now, the inspector general has reported the alleged obstruction, warned that its investigative capacity is being dismantled, and appealed to Congress.
The next test is whether Congress gets answers and whether the watchdog regains the access and resources it says it needs to do its job.
Sources
Reuters, October 1, 2026: Housing agency watchdog warns budget cuts will undermine its work
U.S. Senate Banking Committee, October 1: Senators demand reversal of inspector general funding cuts
Senator Ruben Gallego, October 5: Senators request a hearing with Pulte
Senate Banking Committee, October 6: Warren questions FHFA’s cooperation with GAO
Inspector General Act, 5 U.S.C. § 406: Access to agency records
FHFA Office of Inspector General: Responsibilities and independence
Senate Banking Committee: Membership and contact information