When you think of perfect training for a really challenging job, you might think of something NASA does. The military, too, prepares its troops for every contingency. But how do you prepare for a job representing today's beleaguered mortgage industry? Protective headgear, a calming playlist on the iPod[R] and crisis media training might be good for starters. * Or, better yet, you could come with the perfect resume. * Today with every inch of the mortgage industry under assault, you need to know the working vocabulary that goes with all that terrain. And that really only comes from spending time in those jobs. In order to knowledgably explain to a regulator why its ideas won't work in the real world, real life is the best instructor. * So if there were a perfect resume for someone leading the mortgage industry right now, it might well start with a stint as a loan officer. Originators--and yes, their stock has faded lately--are still the critical folks who work the front lines of a complicated industry with an extremely complicated product to sell. That's why good loan officers have always been so important--because they have to explain a lot of things and make a good experience out of one that really doesn't have a lot going for it. * Top executives from leading mortgage companies have always known the importance of good producers. Typically they know because they've been there, done that. They know--in an indelible, hands-on way--that loan quality starts with the person taking the loan application. Their companies are literally on the line, based on the work of these originators.
And it turns out that today--midway through 2011 -- in the aftermath of a massive failure of mortgage asset quality, the question of what makes for a safe, high-quality mortgage is topic No. 1 in the mortgage industry. How do you give originators the safest possible product to sell, without disqualifying too many would-be customers? That is the question now before the policymakers. The problem is, if you make it too safe, you can't get the borrower in the box. No one knows that better than a loan officer.
Enter David H. Stevens, the new president and chief executive officer of the Mortgage Bankers Association (MBA). His resume is close to perfect for this job. The same goes for the headshot from his last job as Federal Housing Administration (FHA) commissioner. Every inch the polished corporate executive, it seems hard to reconcile the photo of the starched Brooks Brothers exec with the concrete government bunker that's home to the Department of Housing and Urban Development (HUD). (I'm not saying public servants don't usually have nice hair--just not that nice.)
But there you have Dave Stevens--at home in many worlds. He can talk policy and he can talk profit and loss. He's good on the Hill and in the corporate boardroom. He gets it, from just about every angle, and that's why he's invaluable to the MBA right now. And one more thing: He started out as a loan officer.
Optics and Hill cred
Stevens has several other things going for him as the mortgage finance industry faces re-regulation on every front. Stevens earned some serious street cred with federal regulators and members of Congress while heading up the FHA for the Obama administration. And they remember. He saved them from having to do one more unpopular bailout--and that buys a serious halo effect.
As FHA commissioner, Stevens took a string of toughlove measures to pull the FHA insurance fund back from the brink. He and his HUD team literally saved taxpayers from having to bailout the FHA's Mutual Mortgage Insurance Fund at some point in the future.
Stevens came in and found the FHA insurance fund was heading for trouble. During his tenure, the FHA program dipped below the legislatively mandated capital cushion. But from the start, he quickly pushed through (working with Congress in some cases) some measures that would put the program on much sounder footing.
He looked at FHA credit quality the same way they did at one of his alma maters--Freddie Mac--and he didn't like what he saw. So almost from the get-go, FHA originators with a shoddy record of bad loan performance were put on notice or booted out of the program. Insurance premiums were raised and minimum credit scores were put in place. Net-worth requirements for FHA originators were hiked dramatically. And a chief risk officer was brought on board.
Now FHA appears to have turned the corner. New originations are of much higher credit quality and the higher premiums are boosting the capital cushion back up into safer territory. Congress is grateful to the outgoing FHA commissioner, and is publicly telling him so.
At a May 12 Senate banking subcommittee hearing, Sen. Jeff Merkley (D-Oregon) took the time to publicly thank Dave Stevens for his prior service at FHA. He said, "Thank you, Mr. Stevens, for your work at FHA and for the spirit in which you come before the subcommittee today."
The hearing was on tough new servicing standards the government is considering imposing in the wake of the foreclosure crisis. Indeed, on the same day as the hearing, Merkely joined with Sen. Olympia Snowe (R-Maine) in introducing new legislation requiring servicers to establish a single point of contact for borrowers facing foreclosure and an end to so-called dual-track processing in loss-mitigation efforts (meaning pursuing foreclosure at the same time as modification efforts). MBA opposes both measures.
In his testimony, Stevens offered to have MBA and its experts on a new Council on the Future of Residential Mortgage Servicing for the 21st Century work with the Senate in coming up with uniform national servicing standards so they don't have unintended consequences for the industry and for homeowners.
When it comes to these critical advocacy efforts on servicing and other issues, Stevens brings one other strength. He knows the optics of how lobbying looks from the other side. Having been a regulator who was lobbied, he knows what is convincing and effective--and more importantly, what is not.
What's critical, he says, is having the real estate finance industry speak with one voice--and that voice, he says, should be MBA. Inside the Obama administration, as FHA commissioner, he saw a lot of splinter groups that all purported to speak for the mortgage industry. He says it looked dysfunctional to the policymakers, and it was less effective as a result.
Stevens has learned a lot about the cycles and the nuances of the real estate finance business during his 30-year career. That's why it's helpful to wander back through the stops on his resume, to gauge just...