FHFA Director Pulte Slashes Inspector General Budget by 60% Amid Ongoing Probes

Key points

• Pulte cut the FHFA IG budget from $55 million to $20 million for FY 2027, a 61.3% reduction.
• The cuts will force a 70-80% staff reduction, ending the office's criminal investigation capabilities.
• The move follows an internal probe into Pulte’s alleged improper access to mortgage records of Democrats, including NY AG Letitia James.
• Pulte argues the IG budget is 16% of FHFA’s operating budget, compared to a 2% average for other agencies.
• Democrats, including Chuck Schumer and Hakeem Jeffries, demanded Pulte’s resignation and the restoration of funding.

Background

This budget crisis follows a year of escalating tensions between Pulte and internal watchdogs. In November 2025, the Wall Street Journal reported that Fannie Mae investigators found Pulte had improperly directed staff to access mortgage documents of high-profile Democrats, including Letitia James. This led to an investigation by the FHFA IG, which was subsequently forwarded to federal prosecutors. The resulting indictment of James was dismissed after a judge ruled the acting U.S. Attorney was unlawfully appointed. Following this, Pulte’s acting IG, Joe Allen, was removed, and approximately a dozen officials in Fannie Mae’s ethics unit were fired. Pulte has also faced scrutiny for targeting Republican Todd Blanche and for allegedly sharing unauthorized information regarding a Justice Department investigation into Sen. Adam Schiff.

How outlets are covering it

Federal News Network and Mother Jones emphasize the catastrophic impact on mortgage fraud enforcement, noting the IG has secured over 1,270 convictions and $75 billion in recoveries since 2011. They argue Pulte’s 'peer-matching' justification is flawed, as the FHFA IG oversees a vastly larger and more complex regulatory landscape than typical agency watchdogs. TPM frames the cuts as direct retaliation for the IG’s role in investigating Pulte’s partisan targeting of political foes. Politico highlights the sharp divide between Pulte’s defense of fiscal responsibility and the Democratic leadership’s demand for his resignation, characterizing the move as an attempt to evade accountability. All sources agree the cuts will effectively end the office's ability to investigate complex financial crimes.

Why it matters

The defunding of the FHFA Inspector General threatens the integrity of the U.S. housing market, which involves over $7.8 trillion in assets. By dismantling the primary law enforcement entity for mortgage fraud, the administration risks creating a vacuum in oversight that could embolden financial misconduct. Furthermore, the move signals a broader strategy to neutralize internal watchdogs that have investigated the administration’s use of regulatory tools for political retribution, raising serious concerns about the independence of federal oversight bodies.

What to watch

The FHFA IG has begun implementing a reduction-in-force, with plans to terminate its criminal investigations program as soon as feasible. Congressional Democrats have formally demanded Pulte reverse the cuts and restore the budget to the requested levels. Pulte is expected to face continued pressure from Senate Banking Committee members and potentially a formal inquiry into his conduct regarding the improper access of mortgage records. The administration may appeal any legal challenges to the budget cuts, though the IG’s statutory mandate to investigate fraud remains a point of contention.