Magazine article Mortgage Banking

Booked Up

Magazine article Mortgage Banking

Booked Up

Article excerpt

ROLLED BY DAVE'S DESK ON MARCH 4, and he was actually there. Shock. Dave Stevens is logging a lot of hours out of the office these days--so many hours that we couldn't lock down 30 minutes with the man last month. (I am not blaming you, Keitha--really, I'm not.) Between explaining to members around the country the implications of the new rulemakings and speaking to sister trade and other groups, he's been on the go constantly.

Now, with the Federal Housing Administration's (FHA's) finances worrying members of Congress, Stevens is the man they want to see. He served as FHA commissioner from 2009 to 2011.

When we caught up with him at his desk on Monday, March 4, he had just spent the prior Thursday before the Senate Banking Committee testifying on FHA's financial condition.

We asked him what's the sense of the Congress on the FHA's single-family insurance fund concerns. "Across the board, they are very concerned about the FHA," he said. "There's a broad-based view that FHA's solvency needs to be fixed."

But Stevens suggests there's a bit of a misread about the real root of FHA's problems. He says the bulk of the financial problems stem from FHA loans originated from 2006 through early 2009. And the performance problems with those loans are locked in at this point. That means that nothing that is done right now will affect those loans and how much their claims end up draining from the insurance fund.

But at the same time, newer books of FHA loans, following proactive premium hikes and other credit tightening steps, are going to be very profitable. He cites projections that the 2010/2011/2012 books of FHA single-family loans will be positive to the U.S. Treasury--meaning they will actually make money for the federal government.

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Stevens says this distinction among the old and new books of FHA business is not completely understood. He says there is the lingering perception by some in Congress that current FHA originations are not profitable. He says it continues to be a challenge for the Mortgage Bankers Association (MBA) team to educate lawmakers about FHA.

He cautions, "We need to be careful about a throwing-the-baby-out-with-the-bath water mentality."

We asked him about the "sequester"--that weird word that dominated the news until the word "conclave" bumped it off the front page.

How much will the sequester impact housing and government real estate finance programs? As of March 4, he said, it was still "too soon to tell."

He had not yet seen where the Department of Housing and Urban Development (HUD) planned on making its cuts.

But Stevens stressed, "Should cuts have to be made, we hope they do not cut into core business requirements that keep the mortgage markets functioning."

He said the required cuts could affect the handling of individual transaction requests coming into the Homeownership Centers run by HUD. Those centers handle the processing of exceptions, and the sequester could affect the timeliness of responses.

Other areas that could be affected are FHA's multifamily programs--especially functions such as appraisal review, property inspections and other labor-intensive areas required to get multifamily transactions approved.

Sequester-related cuts also might affect the homeownership counseling area, or other programs where HUD has built-in fixed costs such as in the approval of loans for the financing of hospitals.

But overall, Stevens said, on the single-family originations side of FHA, "for the most part it should be business as usual. …

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