FHA’s Loss is MBA’s Gain

Peter Citera - Real Estate InstituteIt was announced yesterday that current FHA Chief, David Stevens, will leave the agency at the end of this month to head the Mortgage Bankers Association.  Those of you that have been following the goings-on in the industry since the subprime debacle (and who hasn’t) will know that David is a strong and competent leader who has successfully guided the FHA through the toughest market in history.  A huge increase in market-share coupled with a huge increase in default rate is a challenge that no sane mortgage lending executive would want to face, yet David tackled the Agency’s problems head-on.  While the dragon is not yet slain – FHA still has some substantial money issues with the mutual mortgage insurance fund – the program is certainly on much more sound footing now than when Stevens took over in 2009, and he deserves credit for righting the ship.

Yes, there have been bumps in the road.  Those of you who have followed me throughout 2010 know that I believe that the MIP changes, though necessary, could have been better handled.  There was no sound logic to the April 2010 decision to raise the upfront MIP to 2.25% in a declining market rife with foreclosures, especially considering that the UFMIP is nearly always financed and, at the time of the policy change, the purchase market was artificially inflated due to the homebuyer tax credit.  It was a knee-jerk reaction to a huge problem that was not well thought out, proving that crisis decisions do not generally breed good policy.

The October reduction in the UFMIP, coupled with an increase in the annual MI, was the logical solution from the start as it generates much more predictable revenue growth and has the added benefit of not raising the size of an insurance payout upon borrower default.  Be that as it may, at the end of the day, it is through Stevens’ leadership that the FHA has managed to remain well-positioned as the product of choice in a still-uncertain mortgage lending world.  I wish him the best as he assumes the position of industry advocate at the MBA.  Godspeed, David – now more than ever the industry needs a well-respected voice advocating for prudence, temperance and tact in an increasingly restrictive regulatory environment.