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After passing the U.S. House of Representatives in a razor-thin vote of 215-214, President Trump’s tax bill, the One Big Beautiful Bill Act, will now face the scrutiny of the U.S. Senate, where Republicans are pushing for an additional $500 billion in cuts.
The $1.5 trillion budget cut passed by the House is to offset the costs of making the 2017 Trump tax cuts permanent, NPR explained, and primarily hinges on slicing funding for Medicare, Medicaid, the Affordable Care Act (ACA), and the Supplemental Nutrition and Assistance Program (SNAP), and reducing student loan repayment options to a 10-year and a 25-year plan.
Although healthcare and student loans have gotten the lion’s share of coverage, the One Big Beautiful Bill Act’s passage in the House relied on proposing key cuts to several Department of Housing and Urban Development programs. If passed, the cuts to HUD would be in addition to the $32.9 billion budget cut outlined in Trump’s FY 2026 budget request.
Eighty-one percent of the cuts in HUD’s FY 2026 budget are aimed at limiting federal rental and homelessness assistance programs and eliminating Fair Housing grants and initiatives.
HUD Secretary Scott Turner has already gotten the ball rolling on some cuts, with plans to lay off 40 percent of the Federal Housing Administration (FHA) staff, rescind several Obama- and Biden-era fair housing rules, and reduce funding to the Fair Housing Assistance Program (FHAP), the Fair Housing Initiatives Program (FHIP) and other assistance programs.
These changes not only impact renters, 5 million of whom get housing assistance through Section 8, but they could also impact homebuyers and homeowners who’ve had their fair housing rights violated, have Federal Housing Administration (FHA)-insured loans or still rely on COVID-era assistance options to avoid foreclosure.
Here’s what you need to know about what’s happening at HUD and the Federal Housing Finance Agency (FHFA), and how you can help your clients navigate what’s ahead:
FHA: No loans for non-permanent residents, the end of COVID-era assistance
The Federal Housing Administration, which is under HUD, is one of the nation’s largest mortgage insurers. The FHA insures loans from HUD-approved lenders who offer lower closing costs, lower down payment requirements and more lenient creditworthiness standards.
- Twenty-five percent of HUD workers accepted the DOGE deferred resignation plan, which allows them to receive pay and benefits through Sept. 30. Inman reported in February that HUD planned to lay off 40 percent of FHA staff; however, HUD has not confirmed the number.
- HUD will no longer allow non-permanent residents to apply for FHA-insured loans. The change, which impacts borrowers with teaching, student and other professional visas, goes into effect on May 25. Those borrowers will still have access to conventional loans.
- HUD also made changes to the Mutual Mortgage Insurance Fund (MMIF) and COVID-19 Recovery Options. The changes limit homeowners to one permanent Loss Mitigation Option every two years versus every 18 months.
- National Housing Conference President and CEO David Dworkin said it’s anyone’s guess on how many HUD workers will face layoffs. The size of those layoffs and whether HUD decides to update its regulatory structure to operate sufficiently with a smaller staff will determine whether the experience for borrowers declines.
Opportunity Zones: Hitting restart in 2027
A holdover from the first Trump term, the 2017 Opportunity Zones (OZ) program offers developers tax breaks when they invest their realized capital gains in projects across 8,700 designated zones. The program has yielded mixed results, with home values in most OZs struggling to match the national average and developers abusing loopholes to receive tax benefits without making actual long-term investments in the zones.
- Trump’s FY 2026 budget request proposes that HUD sunset the program in the first set of 8,700 OZs in 2026. Governors will be able to nominate new zones in 2027.
- The new OZs will favor rural land, with developers getting a 30 percent break, versus a 10 percent break for projects in non-rural zones.
- Experts anticipate that some of the original zones will have their program status renewed; however, for zones that don’t, developers will no longer get tax breaks.
HOME Investment Partnerships (HOME) program: On the chopping block
HOME is HUD’s biggest federal block grant and provides funding to preserve and build affordable housing for renters and homebuyers. HOME grants can be used for down payment, closing costs and mortgage assistance.
- The final rule to update HOME — the first update since 2013 — is expected to offer higher assistance thresholds and streamline homebuyers’ application process.
- Several housing groups lauded the program updates, saying they’ll strengthen tenant protections and help Community Housing Development Organizations (CHDOs) better serve tenants and homebuyers from low- and middle-income communities.
- Trump’s FY 2026 budget request proposes to discontinue the $1.25 billion program; however, Dworkin said Congress will likely deny Trump’s plan to discontinue HOME.
Affirmatively Furthering Fair Housing: A partisan talking point
Affirmatively Furthering Fair Housing requires all local, state and public housing officials to use the Affirmatively Furthering Fair Housing Assessment Tool. The tool uses a 96-part questionnaire to help leaders identify patterns of segregation and concentrated poverty along racial lines.
Former HUD Secretary Ben Carson removed the rule in 2016, and the following HUD secretary, Marcia Fudge, outlined plans to reinstate AFFH and make the tool easier to use. However, HUD, under Fudge, never issued the final rule needed to officially bring the AFFH back.
- Turner has no interest in crafting a new AFFH policy, saying it was “red tape” that prevented jurisdictions from solving housing issues without federal interference.
- Representative Maxine Waters (D-CA) and Senator Elizabeth Warren (D-MA) have introduced the “Restoring Fair Housing Protections Eliminated by Trump Act,” which includes legislation to reinstate AFFH.
- Dworkin said the conversation around AFFH is more of a “rhetorical policy argument than something that’s going to have true, immediate impact” on homebuyers and homesellers from marginalized communities. Proposed cuts to the Fair Housing Assistance Program (FHAP) and the Fair Housing Initiatives Program (FHIP) matter more, he said.
Property Appraisal and Valuation Equity (PAVE) Task Force: A future unknown
The PAVE Task Force was created in 2021 to address appraisal bias among Black homesellers, who’ve reported receiving lowball appraisals compared to their white counterparts who live in the same area. The task force collected appraisal bias data, set federal enforcement actions for appraisers who discriminated against homesellers and created a rule that allowed homesellers to ask for a reconsideration of value if their appraisal came in too low.
- HUD deleted the PAVE Task Force homepage in February and has said nothing else about it since.
- In March, HUD lifted appraisal review procedures enacted last year for FHA lenders to follow to better protect borrowers against discriminatory appraisals.
- In light of lingering questions about PAVE, experts have advised consumers to be vigilant during the appraisal process and flag potential instances of discrimination.
Privatizing Fannie and Freddie: Multiple options on the table
Fannie Mae and Freddie Mac’s regulator, the Federal Housing Finance Agency (FHFA), is weighing plans to restructure the companies. Both government-sponsored enterprises, whose business model relies on purchasing loans from banks and selling them as mortgage-backed securities, were put under conservatorship during the height of the subprime mortgage crisis.
The timeline for restructuring the mortgage giants is still unclear, with FHFA Director Bill Pulte saying he’s waiting for President Trump’s direction.
- In past interviews, Trump floated multiple privatization options, including bypassing Congress using the FHA to free the firms from their conservatorship. However, the president pitched a new plan on May 21 via Truth Social, saying he wanted to take Fannie and Freddie public.
- Pulte later pointed out that Trump “very explicitly says that he wants to take them public. He did not say that he wants to privatize them,” and that the administration is studying whether it could keep the companies in conservatorship.
- Dworkin said there are “a lot of complex questions that still have to be resolved” when it comes to privatization, and it’s anyone’s guess on what method the Administration will choose. However, they must be careful — brashly pulling the GSEs out of conservatorship could lead to mortgage rates rising anywhere from 43 to 97 basis points or almost 1 percent (100 basis points = 1 percent).
- In a move to address fears that mortgage rates might go up if Fannie and Freddie are restructured, Trump posted on Truth Social on May 27 that “the U.S. Government will keep its implicit GUARANTEES, and I will stay strong in my position on overseeing them as President.”
- One theory is that the government could invest its stake in Fannie and Freddie into a sovereign wealth fund and raise cash by issuing preferred shares that pay dividends — an approach Treasury Secretary Scott Bessent says could help put the mortgage giants on sound footing without boosting mortgage rates.
A new credit-scoring system: Double the scores, double the work
The FHFA is seeking a shift from a tri-merge to a bi-merge credit scoring system. The FHFA approved the plan in 2022 with a Q4 2025 implementation deadline, but that timetable has been pushed back. Instead of pulling one score from three credit reporting agencies, Fannie and Freddie will require lenders to pull two scores — FICO 10T and VantageScore 4.0 — from two credit reporting agencies, for a total of four scores.
- Pulte has said he’s “not happy” about price increases levied by the company behind the FICO score algorithm, Fair Isaac, which an industry trade group, Community Home Lenders of America, claims total 700 percent over the last 30 months.
- In addition to introducing competition, backers tout the new VantageScore 4.0 and FICO Score 10 T credit scoring models as more inclusive and accurate. VantageScore – a joint of consumer reporting agencies Equifax, Experian, and TransUnion – claims that implementation of VantageScore 4.0 will boost the eligible pool of mortgage applicants by over 2.5 million borrowers.
- Originators worry that a bi-merge credit scoring system will make it more difficult to assess borrowers’ creditworthiness, as they’ll need to learn the nuances of each system.
- Borrowers with lower credit scores may have fewer options to get approved. FICO 10 T evaluates two years of credit behavior, meaning borrowers can’t pay off a large chunk of debt before applying for a mortgage to improve their score.
Pulling back on equitable housing programs: A hit to minority homeownership rates
Director Pulte issued a directive on March 25 terminating Fannie and Freddie’s Special Purpose Credit Program, saying, “the current level of support for SPCP is inappropriate for regulated entities in conservatorship.”
- Fannie and Freddie had launched SPCPs in select U.S. cities aimed at boosting lending by expanding borrower eligibility criteria, reducing closing costs and providing flexibility in the form of down payment assistance. Lenders can participate in Fannie and Freddie SPCPs or develop their own programs.
- Dworkin is hopeful that lenders will still utilize SPCPs as long as Fannie and Freddie avoid making “unique underwriting changes” that will hinder service to borrowers with lower creditworthiness.
Pulte also did away with a requirement that Fannie and Freddie adopt Equitable Housing Finance Plans every three years and publish annual reports documenting their performance.
- Although a final rule requiring the mortgage giants to adopt Equitable Housing Finance Plans was finalized in May 2024, Fannie and Freddie submitted their first plans in 2021 with the goal of providing long-term, equitable housing solutions for homebuyers from underserved groups. The plan required Fannie and Freddie to identify homeownership barriers and create solutions for those barriers, including leveraging SPCPs.
- “Before the Equitable Housing Finance Plans were created, Fannie Mae and Freddie Mac were doing a horrible job of serving the entirety of the market in an equitable way,” National Fair Housing Alliance (NFHA) Executive Vice President Nikitra Bailey told Inman when Pulte eliminated the requirement.
- Lastly, Pulte withdrew the FHFA’s participation in monitoring unfair, deceptive and abusive acts and practices (UDAAP) in collecting consumer debts, leaving the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) to handle the task.
Slimming the workforce: Fewer workers, reduced services
In April, Pulte went to X, the platform formerly known as Twitter, to announce that Fannie and Freddie had cut more than 25 percent of their workforce. Fannie and Freddie had 16,000 employees at the beginning of 2025. A 25 percent cut means about 4,000 employees have been fired or left the company since March.
- On March 18, Pulte fired 14 Fannie and Freddie board members and appointed himself the chair of both boards, saying that “DEI is dead at Fannie Mae and Freddie Mac.” In April, investor Omeed Malik, a business partner of Donald Trump Jr., was named to Fannie Mae’s board.
- In April, the FHFA cut its Research and Statistics Division and its Division of Public Interest Examination (DPIE) teams, and Fannie fired 100 employees accused of abusing the company’s matching gifts program.
- Pulte also issued a return-to-office mandate for May 1, which is expected to lead to additional workforce losses. The impact of these staff cuts is unclear, with the Community Home Lenders of America voicing hopes the cuts don’t lead to a reduction in the number of approved seller-servicers.
