Pulte’s FHFA Changes Risk Broader Pullback in Minority Lending

A series of abrupt policy changes at the Federal Housing Finance Agency threaten to make banks and nonbank mortgage companies less likely to lend into minority communities.

FHFA Director Bill Pulte announced last month the agency will end special purpose credit programs maintained by Fannie Mae and Freddie Mac, dial back equitable housing plans at the mortgage finance giants, and make other changes to consumer protection and fair housing initiatives.

Pulte also started firing FHFA staff members charged with overseeing consumer protection efforts at Fannie and Freddie and researching affordable housing issues. The changes came as Pulte named himself the board chairman of both Fannie and Freddie, despite a law barring FHFA employees from being directly involved in those companies.

Pulte is taking a sweeping approach to rolling back Biden administration policies that were intended to boost home ownership for Black, Latino, and other minority communities.

The Trump administration’s changes are sending signals to the mortgage market that may diminish private lending, said John Walsh, an Urban Institute research associate focusing on housing policy.

“Banks that have created these programs might back away from them out of fear of retaliation from the administration,” he said.

The FHFA didn’t respond to multiple requests for comment.

“We have reduced regulations at a pace no one has ever seen before and these actions have made the market more safe, sound, and affordable,” Pulte said in a Monday X post.

The FHFA, which took charge of Fannie and Freddie during the 2008 financial crisis, sets affordable housing goals for the companies and also oversees the Federal Home Loan Bank system to support affordable mortgages.

The Trump administration is mulling whether to restore private control of Fannie and Freddie, which purchase mortgages from banks and package them into securities sold to investors.

But Pulte’s policy moves are separate from the privatization efforts, mortgage veterans said.

“It all ties back to this whole issue of trying to remove DEI out of any government support for housing,” said Ted Tozer, the former CEO of Ginnie Mae and now an Urban Institute nonresident fellow.

‘Wrong Direction’

One Biden-era change at the FHFA allowed Fannie and Freddie to create their own special purpose credit programs or purchase mortgages originated through private lenders’ programs.

An SPCP is designed to allow banks, nonbank mortgage lenders, and nonprofits to extend credit to classes of people that would otherwise be denied. In the mortgage context, SPCPs have been used in Black neighborhoods to combat historical redlining.

The FHFA in 2022 joined with the Consumer Financial Protection Bureau and six other federal regulators to back SPCPs, determining they were allowed under the Equal Credit Opportunity Act.

In practice, Fannie and Freddie’s initiative had a limited effect, helping approximately 15,000 borrowers purchase homes, according to the FHFA’s 2023 annual report to Congress.

A more effective way to address racial homeownership disparities would be to allow Fannie and Freddie to back safe mortgages made to borrowers with lower credit scores but the ability to repay their home loans, said Kevin Erdmann, a senior affiliated scholar at George Mason University’s Mercatus Center.

“There’s clearly a lot of mortgages being denied to borrowers who clearly wouldn’t be a problem,” he said.

But Pulte’s justification for ending Fannie and Freddie’s special purpose credit programs didn’t mention their limited current use or potential alternatives.

Loans issued under the SPCP initiative include “underwriting flexibilities” and financial support that are “inappropriate for regulated entities in conservatorship,” Pulte said in the notice posted to his X account on March 25.

Fannie and Freddie would still be able to buy mortgages issued through SPCP loans if they conform with the companies’ underwriting standards.

But eliminating the programs at the government-backed companies sends a broader message to the markets, Erdmann said.

“It’s going in the wrong direction,” he said.

Housing Crisis

In posts on X last month, Pulte also waived a 2024 requirement that Fannie and Freddie engage in equitable housing planning and reporting every three years, which was designed to see how they can slim racial disparities in home ownership.

He also rescinded guidance from last year aimed at preventing unfair and deceptive practices in mortgage lending backed by Fannie and Freddie, eliminated a “repair all” requirement to fix up rental properties, and terminated tenant protections for renters in multifamily properties backed by the mortgage finance giants.

The tenant protections, instituted by the Biden administration, were already likely to have an uneven effect around the country due to differences in existing protections at the state and local levels, said Sharon Cornelissen, the Consumer Federation of America’s director of housing.

“This is just going to make it easier to evict tenants, to hike up the rent,” she said of Pulte’s rollback. “It’s not going to lower housing costs for working families.”

Pulte subsequently eliminated several Biden-era diversity efforts in posts this month. Climate change and environmental policies were also pulled.

The overall impact of Pulte’s moves is likely to exacerbate racial disparities in homeownership, Cornelissen said.

Pulte’s deregulation through social media is also adding to industry uncertainty.

“There doesn’t seem to be much organization in what’s going on now,” said Richard Andreano, the head of Ballard Spahr LLP’s mortgage banking group.

Pulte’s moves “seem to be going hand-in-hand” with President Donald Trump’s push to eliminate government workers and crush diversity, equity, and inclusion efforts, Andreano said.

Coupled with other plans to abolish Biden-era housing policies at the Department of Housing and Urban Development and other agencies, Pulte’s changes may make the nation’s housing affordability crisis even worse, industry watchers said.

“We’re still in this phase of just going DOGE on all the agencies,” Cornelissen said, referring to Elon Musk’s Department of Government Efficiency. “I don’t see a connection to addressing the housing crisis.”