In a significant policy shift under the Trump administration, the new Federal Housing Finance Agency (FHFA) Director Bill Pulte issued an order on March 25, 2025 terminating special purpose credit programs (SPCPs) supported by the government sponsored enterprises, Fannie Mae and Freddie Mac (together, the GSEs). This directive, effective immediately, will significantly impact banks with mortgage-based SPCPs.

SPCPs — programs through which financial institutions may consider prohibited-basis information when determining whether to extend credit to economically or socially disadvantaged groups — are specifically authorized under the Equal Credit Opportunity Act (ECOA) and Regulation B, but not the Fair Housing Act (FHA). Nonetheless, in December 2021, the U.S. Department of Housing and Urban Development’s (HUD) Office of Legal Counsel issued a legal opinion stating that SPCPs that address home mortgage credit needs for economically disadvantaged groups and are designed and implemented in compliance with the ECOA and Regulation B generally do not violate the FHA. In February 2022, multiple federal agencies, including HUD and the FHFA, issued interagency guidance (the Policy Statement) strongly encouraging the use of SPCPs by financial institutions under both the ECOA and the FHA.

However, according to the order, which was posted on Director Pulte’s social media account X, the FHFA now has determined that the current level of support for SPCPs is “inappropriate for regulated entities in conservatorship,” a reference to the FHFA’s conservatorship of the GSEs. The order mandates the immediate termination of SPCPs supported by Fannie Mae and Freddie Mac. Those GSEs are permitted to comply with any contractual provisions regarding prior written notice to lenders, however.

Since President Trump took office in January, HUD’s legal opinion authorizing SPCPs under the FHA has been removed from HUD’s website, but the agency has not yet formally withdrawn the opinion. This could mean that HUD is re-examining the opinion to determine whether to retain it, rescind it, or modify it. The federal agencies have not yet taken action to rescind or amend the Policy Statement, but that is also likely under review.

Our Take

During the preceding administration, the level of support for SPCPs by the federal regulators was very high — to the point that many lenders felt that they needed to implement SPCPs to shield themselves from the very aggressive application of redlining concepts, especially by the federal banking regulators. FHFA’s recent order represents an about-face in this previous high level of encouragement for SPCPs. In light of the FHFA Director’s directive to the GSEs, banks and financial institutions with mortgage-based SPCPs should revisit their written plans and business objectives to determine whether any adjustments are advisable (e.g., to eligibility criteria) or whether to even continue offering them. More generally, this directive suggests that instead of the federal agencies looking upon SPCPs favorably, their use may instead increase regulatory scrutiny. In addition to a potential increase in regulatory scrutiny, private litigation is also a risk, especially for mortgage-related SPCPs, because of the absence of any statutory provision permitting them in the Fair Housing Act. Furthermore, practical risk is presented if SPCPs need to be modified or unwound, which could disrupt business plans in midstream.

We will continue to monitor this issue and provide updates as developments unfold concerning SPCPs.