Labor & Employment Law Daily Wrap Up, SENATE NEWS—Democrats question Fannie Mae, Freddie Mac overhaul, staff reductions, (Apr 17, 2025)

By Sherri M. Schroeder, J.D.

In a letter sent to FHFA’s Inspector General, the senators demand a review of the recent decision to fire board members and employees, dismiss an audit committee, and place unionized employees on leave.

Senators Elizabeth Warren (D-Mass.) and Andy Kim (D-N.J.) have spearheaded delivery of a letter to the Office of Inspector General (OIG) of the Federal Housing Finance Agency (FHFA) asking the OIG to conduct a review of FHFA’s recent actions to “overhaul” the Boards of Directors of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) (the Enterprises). Specifically, the letter asks the FHFA OIG to “determine whether or not FHFA leadership complied with all relevant federal laws, regulations, and agency policies and procedures in its decision making, as well as assess the impact of FHFA workforce reductions on the agency’s ability to fulfill its statutorily mandated functions.”

The letter notes that since September 2008, FHFA has served as both regulator and conservator of both Fannie Mae and Freddie Mac and further notes that both Enterprises play a “critical” role in the U.S. mortgage market and collectively guarantee approximately 50 percent of home loans, meaning that clarity in the operations of the Enterprises is “essential to the stability of the housing finance system.” However, FHFA leadership recently fired 14 of the Enterprises’ board members, dismissed Fannie Mae’s entire audit committee, installed FHFA Director William Pulte as Chair of both boards, and then added three additional new members to Fannie Mae’s board, including a Space X engineer who is also part of Elon Musk’s Department of Government Efficiency (DOGE), according to the letter.

These actions, the senators stress in their letter, not only raise key questions about DOGE’s role in day-to-day FHFA and Enterprise activities, but it is also unclear how FHFA decided whom to keep or fire on the board or whether Pulte’s appointment complied with existing law, which prohibits an FHFA Director from holding any office, position, or employment in any FHFA-regulated entity or entity-affiliated party.

The letter further notes that Pulte placed 35 unionized FHFA employees on administrative leave, and Fannie Mae announced that it had fired over 100 employees “caught engaging in unethical conduct, including facilitating fraud.” Although the senators agreed that it is critical that federal employees not engage in unethical or illegal conduct, they also stated that it is “essential for Congress to understand whether workforce reductions at the FHFA comply with all relevant laws and agency procedures.”

Therefore, the letter requested that the FHFA OIG conduct a review to address:

• The specific steps FHFA leadership took to alter the Fannie Mae and Freddie Mac boards, including which individuals were added to or fired and why, who made the decision to overhaul the board, and whether DOGE was involved in the decision;

• Whether the board alterations complied with all relevant federal laws, regulations, and agency policies and procedures;

• Whether Pulte’s appointment as Chair of the boards complied with 12 U.S.C. 4512(g) and what, if any, legal analysis was conducted in advance of that appointment;

• DOGE’s access to data housed at FHFA, Fannie Mae, or Freddie Mac, including what laws, regulations, and policies and procedures govern that access and whether such were followed;

• The number of FHFA employees currently on administrative leave, the components these employees are from, and the impact of such administrative leaves on FHFA’s ability to comply with its statutorily mandated functions and on the stability of the housing finance system; and

• An overview of the firing of the 100 Fannie Mae employees for “unethical conduct” and “fraud,” including how many in total were fired, the details of the circumstances resulting in the firing of each, whether all identified cases of fraud or unethical conduct have been halted, whether relevant laws, regulations, etc. had been followed in the identification and firing of the employees, the policies and procedures currently in place at FHFA to prevent fraud, abuse, and unethical employee conducts, and whether such were followed.

Warren and Kim were joined by six colleagues in sending the request—Sens. Chuck Schumer (D-N.Y.), Cory Booker (D-N.J.), Kirsten Gillibrand (D-N.Y.), Lisa Blunt Rochester (D-Del.), Catherine Cortez Masto (D-N.V.), Ron Wyden (D-Ore.), Tina Smith (D-Minn.), and Raphael Warnock (D-Ga.).

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