1.Breaking Down the OMB Memo

The OMB memo outlines a two-phase process for federal agencies to submit their RIF and Reorganization Plans. Phase One, due by March 13, 2025, requires agencies to identify which offices provide direct services to citizens, statutory requirements governing agency subcomponents, and non-essential staff or functions. Agencies must also recommend which offices should be eliminated or consolidated and provide a timeline for implementation. Phase Two, due by April 14, 2025, requires agencies to submit a final restructuring plan, including a proposed organizational structure, expected staff levels, office relocation plans, and justifications for any exclusions. The memo signals a significant shift in federal operations, demanding that agencies justify their workforce and budget as part of a broader government streamlining effort.

2.How Will This Impact Mortgage and Housing Programs?

While many agencies will face significant cuts, federal housing programs like the Federal Housing Administration, the Department of Veterans Affairs loan program, and Rural Housing Service appear to be viewed favorably by the administration. There are strong indications that these programs will continue to play a critical role in expanding homeownership.

3.FHA: A Revenue-Generating Program at Risk?

Despite expectations of staff reductions within the FHA, the administration recognizes that the program generates revenue rather than requiring taxpayer funding. With a “negative credit subsidy” exceeding 2%, the FHA currently generates more than $2,000 in revenue for every $100,000 of insured loans. This could work in its favor as the administration evaluates programs based on financial sustainability.

4.VA and RHS: Continued Support for Targeted Homeownership Programs

The VA and RHS loan programs, which serve veterans and rural communities, also appear to have strong support within the administration. These programs are seen as providing essential benefits to key constituencies, making them less likely to face major cuts.

5.What About Fannie Mae and Freddie Mac?

While government-sponsored enterprises Fannie Mae and Freddie Mac are not directly impacted by this restructuring, any policy shifts in the broader housing finance system could have downstream effects. During his recent confirmation hearing, William Pulte, a key housing policy figure, expressed concerns that changes to the GSEs could put “upward pressure on interest rates.” This suggests that the administration is aware of the potential risks of housing market disruptions and may approach GSE reform cautiously.

6.What Comes Next?

This is just the beginning of a major government restructuring effort. As agencies submit their plans in the coming weeks, we will gain further insight into how these changes will impact mortgage and housing programs. While the administration appears to recognize the importance of FHA, VA, and RHS programs, significant reductions in staffing and program administration could still lead to delays, increased scrutiny, and procedural hurdles for lenders and borrowers.

We’ll continue to monitor developments and provide updates on how these changes may impact the mortgage industry. Stay tuned for further analysis as more details emerge.

For more information, you can read the full OMB memo here and the Executive Order here.