With more than two decades in the financial services industry, Stevens has overseen every aspect of home financing, from creating mortgages to selling them on the secondary market. Those experiences will be helpful to Stevens as head of the Federal Housing Administration (FHA). Stevens is the only FHA commissioner in recent years with a strong background in home mortgages.
The FHA position will be one of the most closely-watched and challenging in President Obama’s administration, thanks to the 2008-2009 economic crisis and the subprime mortgage meltdown. As head of the FHA, Stevens will be responsible for ensuring the agency makes good bets on the mortgages it guarantees. The FHA has assumed the risk for almost a third of the new mortgages drafted in 2009, and critics worry that the government agency has not adequately screened applicants.
At a Glance
Current Position: Head of the FHA (since March 2009)
Career History: President and COO, Long & Foster (Oct. 2008 to March 2009); Vice President of mortgage, title and insurance division, Long & Foster (2006 to 2008); Executive Five President, Wells Fargo Home Mortgage (2006)
Stevens was born in New York City, but he grew up in Connecticut. After graduating from the University of Colorado at Boulder, Stevens took a job in 1983 at World Savings Bank, a California savings–and–loan company.ElBoghdady, Dina, “Local Realty Executive to Direct FHA,” The Washington Post, March 23, 2009 There, he was a jack of all trades, working in sales and marketing, affordable lending, product development, as a loan prospector, and in communications. Eventually, Stevens was promoted to group senior vice president and national sales manager for its mortgage division.Hagerty, James R. and Simon, Ruth, “Obama to Appoint Mortgage Executive to Head FHA,” Wall Street Journal, March 22, 2009
In 1999, Stevens moved to Freddie Mac, which was seized by federal regulators in September 2008 because of a steep rise in mortgage delinquencies, to run the single-family business practice as executive vice president. In that position, he worked with lenders like banks. Stevens moved from there in 2006 to Wells Fargo Home Mortgage as executive vice president dealing with mortgage brokers.ElBoghdady, Dina, “Local Realty Executive to Direct FHA,” The Washington Post, March 23, 2009
Long & Foster
In 2006, Stevens joined Long & Foster, the largest privately-owned real-estate firm in the country. He ran the company’s affiliated businesses, including its mortgage, title and insurance division. In October 2008, Stephens was named president and chief operating officer of the firm. At that point, Long & Foster was struggling with the fallout from the mortgage meltdown and credit crunch. P. Wesley Foster Jr., the company’s founder, said Stevens' promotion was "designed to ensure the continued viability of our well-managed and financially stable company."ElBoghdady, Dina, “Long & Foster, Facing Industry Slump, Names New President,” The Washington Post, Oct. 24, 2008
President Barack Obama tapped Stevens to run the FHA in March 2009. “David's depth of knowledge in real estate, housing and the mortgage industry will help us transform not only the way HUD does business, but help to transform the housing market as the FHA's market share continues to grow,” Secretary Shaun Donovan said in a statement about Stevens’ nomination in March 2009.“David Stevens Nominated for Housing Assistant Secretary and FHA Commissioner,” States News Service
March 23, 2009
The Issues
Stevens assumed control of the FHA at a perilous time. Though the agency, which was founded in 1934, does not make loans, it insures certain lenders against mortgage defaults. The FHA currently has a $400 billion mortgage portfolio and insures loans with a down payment of as little as 3.5% of the home’s value.Federal Housing Administration web site
The crash of the subprime industry has also led to an explosion in the number of FHA home mortgages. In the 4th quarter of 2008, the agency insured 30 percent of all new mortgages, compared with about 2 percent three years ago, according to The Washington Post. Additionally, the number of FHA loans that defaulted tripled in 2008.ElBoghdady, Dina, “Local Realty Executive to Direct FHA,” The Washington Post, March 23, 2009
Some observers worry that the FHA is setting up a second housing bubble. In the first six months of 2009, it backed nearly 2 million mortgages worth at least $328 billion and insured 21.5% of all new mortgages last year, up from fewer than 6% in 2007.Puzzanghera, Jim, "FHA may be setting up repeat of housing bubble, lawmakers worry," Los Angeles Times, Oct. 8, 2009
The FHA’s increased scope, coupled with the increasingly tenuous mortgage industry, has led some policymakers to question whether the FHA has the personnel and technology to properly scrutinize the lenders it works with.ElBoghdady, Dina, “Local Realty Executive to Direct FHA,” The Washington Post, March 23, 2009
"It's not the least bit implausible to be concerned about the ever-deteriorating performance of the FHA portfolio," UCLA finance professor Stuart Gabriel told the Los Angeles Times in 2009. "The jury is out as to whether the FHA is going to need a government infusion."
The fear is based in part on the percentage of FHA loans that are delinquent or in foreclosure. In 2009, the percent of borrowers who missed at least three mortgage payments jumped to 9.1 from 6.5. And its secondary reserve fund may fall below 2 percent of all mortgages on its books. This has some critics calling the FHA to raise the down payment it requires.ElBoghdady, Dina and Keating, Dan, "Rising FHA default rate foreshadows a crush of foreclosures," Washington Post, Feb. 2, 2010
Stevens told the Los Angeles Times that the agency is trying to reduce risk by lending to people with higher credit scores. He also said the FHA requires all borrowers to document their incomes and insures only standard, 30-year fixed-rate mortgages.
"No one's more risk-averse in FHA's history than me, but I do worry about people jumping to legislative solutions that are not based on factual information," he told the L.A. Times. "We're not going to need a taxpayer bailout ... it's a fact."Puzzanghera, Jim, "FHA may be setting up repeat of housing bubble, lawmakers worry," Los Angeles Times, Oct. 8, 2009
Home Equity Loans
When Stevens was president of Long & Foster, he tried to educate consumers about the differences between home-equity loans, which act like a fixed-term second mortgage, and home-equity lines of credit, which operate like a credit card. “We have to be very careful to find out exactly what these customers are asking for and how they want to use their money,” Stevens told The Washington Post in 2008. “Then we can help them decide whether they want a home-equity loan or a home-equity line of credit.”
Stevens will work at HUD alongside Shaun Donovan, the department’s secretary and Ron Sims, the department’s deputy.
The National Association of Realtors hailed Stevens’ selection.“NAR Applauds Appointment of David Stevens to FHA Head,” Targeted News Service, March 23, 2009
