Banking and Finance Law Daily Wrap Up, COMMUNITY DEVELOPMENT—Lawmakers urge FHFA to overhaul Fannie Mae, Freddie Mac note sales practices, (Mar 10, 2026)

By Shashi Kant, BALLB, LLM

Senate Democrats argue institutional investors are acquiring single-family homes through GSE mortgage note transactions.

Six Senate Democrats urged Federal Housing Finance Agency Director William J. Pulte to reform Fannie Mae and Freddie Mac note sale processes, arguing that the government-sponsored enterprises’ bulk sales of delinquent and previously delinquent mortgages transfer single-family homes from struggling households to institutional investors. In a letter, the senators stated that current note sale practices may conflict with a January 2026 executive order directing federal agencies to limit the ability of large institutional investors to acquire single-family homes. The letter was signed by Sens. Jack Reed (D-R.I.), Jeff Merkley (D-Ore.), Sheldon Whitehouse (D-R.I.), Adam Schiff (D-Calif.), Ron Wyden (D-Ore.), and Tina Smith (D-Minn.).

Note sales contribute to institutional ownership. The senators wrote that, under FHFA oversight, Fannie Mae and Freddie Mac sell pools of delinquent and previously delinquent mortgage loans to private purchasers through bulk note sales. According to the lawmakers, publicly available FHFA data shows that loans sold through these transactions are “predominately purchased by private equity firms and other institutional investors.” They further wrote that many borrowers ultimately lose their homes following those transfers and that a significant portion of the resulting properties are later held as rentals or sold to investors. The senators stated that FHFA data indicates that roughly 35 percent of properties foreclosed upon or voluntarily transferred to lenders after GSE note sales are ultimately held by the mortgage purchaser for rental, sold to another investor, or remain on a lender’s books. They argued that these outcomes demonstrate that note sales can contribute to institutional investor ownership of single-family housing.

Executive order. The lawmakers tied their request to an executive order issued in January directing federal agencies to ensure that federal housing programs do not facilitate acquisitions of single-family homes by large institutional investors where homes could otherwise be purchased by owner-occupants. That order directed FHFA and other agencies to take steps to prioritize sales of federally backed single-family properties to families and owner-occupants and to limit institutional purchases to the maximum extent permitted by law (see Banking and Finance Law Daily, Jan. 21, 2026). The senators wrote that FHFA, as regulator and conservator of Fannie Mae and Freddie Mac, has authority to modify the GSEs’ note sale programs and should do so to ensure those programs align with the administration’s stated housing policy goals.

Proposed changes. In their letter, the senators asked FHFA to direct the GSEs to adopt several changes to the structure of note sales. First, they urged FHFA to prohibit institutional investors from purchasing note sale pools. They also asked FHFA to establish “first-look” opportunities allowing states, municipalities, and nonprofit organizations to purchase the pools before other buyers.

Additionally, the lawmakers asked FHFA to ensure that loans are not included in note sales until all required loss mitigation options have been exhausted. They also urged FHFA to require note sale purchasers to offer borrowers loss mitigation and payment relief options comparable to those available through GSE-backed servicers.

The senators believe that FHFA should require quarterly reporting by note sale purchasers regarding loan outcomes, including loss mitigation efforts, foreclosure activity, charge-offs, resales, and key loan characteristics such as loan-to-value ratios. Finally, they asked FHFA to conduct regular Community Impact Pool and Extended Timeline Pool offerings targeted to nonprofits and smaller purchasers.

Homeownership for families. A press release issued by Reed’s office stated that the lawmakers were seeking to ensure that federal housing policy supports homeownership opportunities for families rather than institutional acquisition of single-family housing. According to the release, the senators argued that reforms to the GSE note sale process would help ensure that homes tied to distressed mortgages remain accessible to owner-occupants and community organizations rather than being acquired by large investors.

LegislativeActivity: CommunityDevelopment FinancialStability