Another watchdog out - and yes, it could just affect UK mortgages
The acting internal auditor of the United States agency responsible for overseeing its vast network of government-backed mortgage financiers has been removed from his post, deepening a political storm over regulatory independence under President Donald Trump.
Joe Allen, the acting inspector general at the Federal Housing Finance Agency (FHFA), which supervises mortgage giants Fannie Mae and Freddie Mac, was dismissed this week, according to Reuters . His removal coincides with growing scrutiny of the agency’s director, Bill Pulte, a strong supporter of the Trump administration, who has faced criticism for pursuing investigations into the president’s political opponents.
The FHFA, established after the 2008 financial crisis to stabilise America’s mortgage market, has traditionally operated quietly. Under Pulte’s leadership, however, the regulator has adopted an unusually combative posture. He has announced criminal referrals involving several long-time critics of the president, including New York’s attorney general Letitia James, Federal Reserve governor Lisa Cook and California senator Adam Schiff.
The agency has not commented publicly on the decision.
A wider purge of U.S. watchdogs
Allen’s removal forms part of a broader pattern within Washington. Nearly two dozen inspectors general — the internal watchdogs who monitor misconduct and waste across federal departments — have been dismissed, reassigned or left without adequate resources during Trump’s second term. The White House has also restricted the budget of the council that oversees those offices.
According to those familiar with events, Allen was dismissed after attempting to share documents with federal prosecutors in Virginia. Two sources described the information as constitutionally required, while another said it might have proved significant in pending legal proceedings.
He had also been preparing to notify Congress that the FHFA was refusing to co-operate with his office, a move that would have drawn attention to Pulte’s management of the regulator. Allen’s draft letter was unfinished when he received notice of termination from the White House.
By Monday, the FHFA website listed the inspector general’s position as vacant. Archived pages show Allen in post as recently as late September.
Legal and political repercussions
The dismissal comes amid continuing legal battles involving Letitia James, who last year secured a $450 million civil fraud judgment against Trump. James has pleaded not guilty to criminal charges of bank fraud and making false statements to a financial institution, describing the case as politically motivated.
The charges were brought by Lindsey Halligan, the interim U.S. attorney for the Eastern District of Virginia, who was appointed directly by Trump after her predecessor declined to pursue the case for lack of evidence.
Democratic senator Elizabeth Warren of Massachusetts responded to news of Allen’s removal by saying that FHFA director Bill Pulte “has some answering to do.”
Pulte, who made his fortune in homebuilding before joining government, has increasingly used his position to pursue allegations of mortgage fraud involving individuals who have opposed the president. Last week he announced that he had dismissed several dozen employees at Fannie Mae as part of what he described as an internal restructuring.
Implications for the mortgage sector
For mortgage professionals and investors, Allen’s dismissal raises broader concerns about the politicisation of financial regulation in the United States. The FHFA exerts wide influence over the global housing finance system through its supervision of Fannie Mae and Freddie Mac, which together guarantee around half of America’s $13 trillion mortgage market.
Any sustained instability within the agency could affect investor confidence and complicate cross-border exposure to U.S. mortgage-backed securities, an asset class still held by several major British banks and pension funds.
Allen, a 40-year veteran of the U.S. Department of Justice, had served as acting inspector general since April. He previously held senior legal positions at the Bureau of Alcohol, Tobacco, Firearms and Explosives. It remains unclear whether he will continue in any other capacity within the FHFA.
For now, the post responsible for policing misconduct at the core of the American mortgage system lies vacant — a gap that, critics say, reflects the uneasy balance between political loyalty and institutional independence in Washington.
Why it matters for Britain
While the FHFA may seem a distant player from the perspective of a British broker or lender, its oversight of Fannie Mae and Freddie Mac influences the pricing and stability of global mortgage-backed securities — a key benchmark for wholesale funding markets. Shifts in U.S. policy direction can ripple into gilt yields, covered bond spreads and the cost of securitisation for UK lenders.
If political interference undermines confidence in the U.S. mortgage market, analysts warn that global investors could demand higher risk premiums across structured debt instruments. That would, in turn, affect the relative pricing of UK mortgage assets, potentially nudging up funding costs for banks and non-bank lenders alike.
In other words, turbulence in Washington’s housing regulator is not merely an American drama; it may ultimately influence the cost of borrowing for British homeowners too.
