FHFA‘s Mortgage Fraud Investigations Face Legal Scrutiny
WASHINGTON, D.C. – Investigations into potential mortgage fraud led by Federal Housing Finance Agency (FHFA) Director Sandra Thompson and board chair Mark Pulte are drawing legal questions regarding the agency’s authority and procedures, according to a recent analysis by Antimonopoly Counsel staff attorney Domenic Powell. The concerns center on whether the FHFA is operating within the bounds of its legal authority, perhaps exposing the agency and government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac to lawsuits.
Powell’s analysis highlights a lack of visible action by the FHFA to proactively address mortgage fraud through established regulatory means, despite reports of increased collaboration with companies like Palantir to utilize artificial intelligence for fraud detection – a partnership announced May 28, 2025, by CNBC. While the FHFA has a safety-and-soundness mission that arguably includes combating fraud, Powell notes the agency hasn’t demonstrably employed tools like stricter anti-fraud procedures for GSEs, targeted examinations, or required reporting.
The core of the legal challenge lies in the FHFA’s expanded investigative role.Powell raises three key concerns: potential lawsuits challenging the investigations as exceeding the agency’s authority (ultra vires), the possible forfeiture of liability protection for GSEs making “good faith” fraud reports due to Pulte’s dual role as regulator and board chair, and potential violations of the Privacy Act stemming from disclosures of individual records, including postings on social media platform X.
The Privacy Act protects individuals from improper disclosure of federal records and requires agencies to safeguard personally identifiable details. powell points to FHFA regulations (12 CFR § 1204.8) mandating protection of such information from public view.
The ongoing trial of New York Attorney General Letitia James in Virginia may shed light on the origins of Pulte’s investigations, Powell suggests. however, he anticipates that direct legal challenges to the FHFA’s actions will likely be necessary to clarify the scope of the agency’s authority.
Domenic Powell is a staff attorney with Antimonopoly Counsel, specializing in competition and regulatory matters. He previously served as counsel with the Consumer Financial Protection Bureau and as a fellow of the ABA section of Administrative Law & Regulatory Practice.His views are his own.
