The head of the Office of Inspector General for the Federal Housing Finance Agency is accusing the agency of an “unreasonable refusal to provide necessary resources” to conduct oversight over financial institutions.
In a letter sent to lawmakers, including the chairs and ranking members of the Senate’s Banking, Housing and Urban Affairs Committee and the House’s Committee on Financial Services, James Hodge, who serves as acting principal deputy inspector general, said that cuts made by FHFA will paralyze the office.
“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 the letter dated Wednesday.
On Wednesday, FHFA, which is led by Bill Pulte, announced it would dramatically downsize the budget for the inspector general, arguing that its funding was an “extraordinary budgetary outlier.” The office oversees critical independent investigations of mortgage fraud, performance audits and compliance reviews of FHFA’s policies.
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In response, the inspector general is arguing that the cuts — which would amount to a total of $35 million in funding — would result in a reduction in staff by up to 80%. It warned that it was given an initial amount of $10 million for the first six months of the 2027 fiscal year, an amount that OIG estimates it is on track to “exhaust” in the first three months.
Due to the drastic cuts, Hodge anticipated that the watchdog would have to “cease” efforts to support the Department of Justice’s National Fraud Enforcement Division.
“We will be forced to cease supporting ongoing criminal investigations as soon as feasible after consultation with the Department of Justice and the more than 30 U.S. Attorney’s Offices in which we have ongoing investigations, and we will have to cease our efforts to directly support DOJ’s National Fraud Enforcement Division. We will not open new criminal matters,” Hodge said in his letter.
The White House referred The Washington Sun to FHFA. A spokesperson for the agency told The Sun that “FHFA supports a strong, independent OIG, while still requiring responsible financial stewardship.”
“FHFA is not cutting oversight; it is right sizing the OIG’s budget, requiring the same fiscal discipline it has applied to itself while preserving the OIG’s full statutory independence and investigative authority,” the spokesperson added.
The regulator’s move is the latest attempt by the Trump administration to reshape inspector general offices across agencies. Democratic lawmakers across both chambers of Congress were frustrated by the changes by FHFA.
“Apparently it wasn’t enough for President Trump to remove the acting inspector general last November — now Pulte wants to dismantle the office entirely,” more than half a dozen Democratic lawmakers, including Senate Minority Leader Chuck Schumer, House Minority Leader Hakeem Jeffries and Sen. Elizabeth Warren (D-Massachusetts), said in a joint statement on Wednesday.
“Bill Pulte should resign, and if he does not, Congress must hold him accountable.”
Pulte responded to the statement in social media, taking aim at the Senate’s top Democrat on housing issues.
“Elizabeth ‘Pocahontas’ Warren is introducing a bill tonight to kill this good financial stewardship to align our IG’s office with its Peer IG Offices,” Pulte posted on X Wednesday night in response to the Democrats’ statement. “It’s very sad that Pocahontas wants to waste precious federal money like a drunken sailor.”
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