HUD Internal Memo Warns of Fraud, Waste Due to Staff Cuts

Elon Musk’s mission to eliminate waste, fraud and abuse from the federal government has seemingly done the opposite, at least at the Department of Housing and Urban Development.

HUD’s Office of General Counsel said in a confidential report seen by Bloomberg that programs tied to are “significantly increasing litigation risk and the risk of fraud, waste and abuse” after cuts at the agency.

The report comes on the heels of a forthcoming Government Accountability Office audit of the agency, requested by Sen. Elizabeth Warren. HUD distributed a questionnaire to its departments ahead of the audit.

Vital functions such as underwriting loans, processing mortgage insurance claims and completing apartment building sales could be delayed or disrupted by the staff exodus, according to the memo.

A response to the questionnaire from the agency’s Departmental Enforcement Center detailed how the loss of personnel, capacity and expertise could lead to corruption, inefficiency, foreclosures, rampant fraud and “predatory practices” — all things DOGE promised to stamp out.

HUD did not confirm its internal communications, but claimed staff departures were largely voluntary and said the restructuring going on behind the scenes is routine. About 2,300 staffers have left the department in the four and a half months since President Donald Trump took office for his second term.

The Office of General Counsel has lost 39 percent of its office staff, including 43 percent of its staff in field offices. HUD also estimates it will lose a majority of its field office legal managers by the time the deferred resignation period closes at the end of September.

Meanwhile, lawyers and other agency employees are being asked to relocate, according to staffers, but without being promised promotions or reimbursement of relocation costs. HUD is looking to close dozens of state field offices — seemingly in violation of federal law — and sell its Washington, D.C. headquarters.

The questionnaire distributed across HUD, meanwhile, raised the question of what responsibilities could be undertaken by artificial intelligence.

— Holden Walter-Warner