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Back in the Saddle

FHA Commissioner Brian Montgomery is back for round two, but he didn’t have an easy road getting there. Montgomery sits down with DS News to talk tech, strategy, and serving the American people.

Editor's Note: This feature originally appeared in the November issue of DS News, out now.

After sitting vacant for more than four years, the role of Federal Housing Administration (FHA) Commissioner has finally
been filled. Though there were temporary leaders during that time—Acting Commissioner Dana Wade and Senior Advisor Adolfo Marzol, for example—a presidentially appointed, Senate-confirmed commissioner hasn’t been at the helm since 2014.

It’s a problem that Brian Montgomery, who was officially confirmed to the position in May, said is doing the country a disservice.

“At the end of the day, it’s the American people that lose out,” Montgomery said. “My position was vacant. There hadn’t been a confirmed FHA commissioner since October of 2014. That’s almost four years that position was vacant.”

THE MISSING CEO

Montgomery likens the vacancy—as well as the now 4.5-year one currently afoot in the office of Public and Indian Housing—to a corporation without a CEO.

“ That person is the de facto CEO. Could you imagine?” he asked. “ The Public and Indian Housing budget is $25 billion. The FHA budget is $10 to $11 billion. Can you imagine a $10- to $11 billion-dollar company not having a CEO for four years?”

Still, the agency wasn’t without guidance during those four years, Montgomery said. He applauds the work of Wade and Marzol, saying they “did a great job”—especially given the difficulty nonconfirmed leaders face in government positions.

“Once you have the Senate-confirmed person in the position, it’s much easier to get things done,” Montgomery said. “It’s never easy, but it’s much easier to get things done when the Senate-confirmed person is in there.” Ultimately, a Senate confirmation gives the commissioner more clout—more authority to get things done, Montgomery said. And at an agency that, as he calls it, is “the hallmark for first-time homebuyers,” getting things done is vital.

“FHA borrowers are somewhere between 81 to 83 percent first-time homebuyers,” he said. “It’s also been the hallmark of a lot of minority homebuyers.”

Because of its unique ability to serve these cohorts—particularly minorities—the FHA is going to be of growing importance in the coming years, Montgomery said. He estimates that 70 percent of new homebuyers will be minorities in 20 years, with Latinos leading the pack in terms of FHA purchases.

“We need to make sure FHA is there to help serve that market,” Montgomery said. “Not just for first-time homebuyers, but also to play the so-called counter-cyclical role that FHA has performed heroically several times in our nation’s past, especially after the housing market collapsed in 2007 and 2008, when FHA stepped in.”

TAKING ON TERM NO. 2

Montgomery’s ascension to the FHA’s top position wasn’t an easy one, to say the least. Despite his previous tenure as commissioner from 2005 to 2009—he served under Presidents George W. Bush and Barack Obama—his experience didn’t exactly make for the smooth second confirmation most would expect.

His most recent Senate confirmation hearing? Montgomery said it was almost the complete opposite of his first one.

“I’d been at the White House and I had already been vetted, so that side of it was fairly quick,” he said of his 2005 confirmation. “I was able to get through a process up on the Senate known as unanimous consent. I got through the committee without any objection.”

The first time around, the process took a mere 60 to 65 days, he said. This time, the gap between Montgomery’s appointment— which took place in September 2017—and his eventual confirmation on May 23, 2018, was a whopping eight months.

“ This most recent time, the hearing was the complete opposite,” Montgomery said. “I’m the same person, right? Assistant secretaries and commissioners would typically go through unanimous consent. is go-around they’re doing the 30-hour rule for almost every nominee. That’s 30 hours of debate.”

During his most recent Senate confirmation hearing, the Trump appointee faced opposition from Sens. Elizabeth Warren and Sherrod Brown, both who questioned his past work with The Collingwood Group—which helped some of the nation’s biggest lenders navigate programmatic and legal challenges. ey also called into question his ability to put aside potential conflicts—particularly with past Collingwood clients like U.S. Bank and Wells Fargo—should he be confirmed.

“My ethics agreement with HUD and the Office of Government Ethics spells out the limited circumstances under which I would be required to recuse myself,” Montgomery said. “It will not interfere with my ability to perform the duties of FHA Commissioner.”

During Montgomery’s two-hour hearing, he discussed everything from the housing crisis and resulting underwriting standards to affordable rental housing and mortgage insurance.

“Public service is an honor that I take very seriously, and if confirmed, I will do my best to, once again, further equal access to affordable rental, housing, and homeownership opportunities, and seek solutions to restore vitality to the housing market,” Montgomery told the Senate.

He also lauded FHA’s performance during the housing crisis, which occurred during his first tenure as commissioner.

“FHA played no role in the housing boom or the collapse, but it was FHA, quite frankly, that stepped in and provided more than a trillion dollars in mortgage liquidity that helped more than 8 million families purchase or retain their homes between 2008 and 2012, and I am extremely proud of the effort that the HUD career staff played in that role,” he said. “Putting an exclamation point on that role, one noted economist said in 2011, quote, ‘If FHA lending had not expanded after private mortgage lending collapsed, the housing market would have cratered, taking the economy with it.’’’

When Montgomery was finally confirmed seven months later, HUD Secretary Dr. Ben Carson called to congratulate him.

“Brian brings a wealth of housing knowledge and experience to HUD, having held this position in two previous administrations, and we are excited to welcome him back to the agency,” Carson said in a statement. “FHA’s work is critical to HUD’s mission of advancing sustainable homeownership opportunities and quality affordable housing for all Americans. Brian understands this better than anyone and will be ready on day one to address the challenges of today’s housing market.”

FULL STEAM AHEAD

Now that the lengthy confirmation process has finally come to a close, Montgomery is plowing full steam ahead, working 12-hour days to steer the ship—and all that is inherent.

Most of his time, Montgomery said, is spent in meetings. After all, he’s not just the head of FHA’s single-family unit. He’s also in charge
of the agency’s $90 billion-dollar multifamily portfolio and its $35 billion-dollar portfolio of healthcare facilities and nursing homes.

“I’d say, probably, eight hours of my day is in meetings with my staff,” he said. “As you can imagine, there’s a lot of meetings discussing everything impacted within those different program offices.”

There’s also the work Montgomery does with other groups—public housing, community planning, and development, etc., to name a few—as well as his speaking engagements and other public appearances, all of which are aimed to further the FHA’s goals and better its work with partner agencies and lenders.

Montgomery even spoke at the recent Five Star Conference and sat down with the Mortgage Servicing Alliance to get input from the ‘boots on the ground,’ as he put it.

“I like to think we need to hear from what’s happening from what I call ‘boots on the ground’—the day-to-day practitioners, whether it’s in default servicing, loss mitigation, origination, or property management,” he said. “While you can certainly hear that things aren’t working in Washington, D.C., I like to get out to the rest of the country, and this conference, in particular, has provided a great opportunity to do that. Whether it’s me speaking or, more importantly, me listening, I’m able to hear from the day-to-day FHA practitioners what’s working, what’s not working, what could work better, and how it could work better.”

HIS SIGHTS ARE SET

When looking ahead, Montgomery said his goals for FHA are twofold: first, strengthen its capital and second, modernize the agency’s processes and technologies.

On the former, Montgomery explained, “We have a responsibility to the taxpayers to help balance our mutual mortgage insurance fund and to keep us in an actuarially sound position,” he said. “So, ‘strengthen our capital’ is always tantamount to what we do. Managing our risk is always extremely important.”

But xing the agency’s technology, which Montgomery said “has been there a long time,” could help in that regard, too.

“Our technology was insufficient my last tenure and, by and large, that technology’s still there,” he said. “Fixing that allows us to not only bring some economy to the scale, but also to help wring out inefficiencies and ultimately actually save us money. This is something that was actually cited in an audit by the Office of Inspector General last year.”

Some of the work has already begun. Under the last administration, Montgomery said FHA’s loan-review system, defect taxonomy, and electronic appraisal-delivery system were all overhauled.

“Credit goes to them. ey also helped develop the FHA technology roadmap, which we’ve updated,” he said. “That will allow us to move generationally ahead. It hasn’t been done because of the expense, and that’s something I’m trying to do right now, working with Senate and House appropriators and authorizers to hopefully get FHA the money that it needs.”

But there’s still room for improvement. As of June this year, FHA had 135 outages in its single-family systems.

“I can’t imagine that the private sector functions that way,” he said. “We’re a $1.2 trillion book in single-family—$1.3 trillion
if you add it all together. It’s critical for us to serve our mission, that we better interact with our partners out there, whether they’re lenders or servicers. There’s been some amazing technological advances in this industry over the last ve or 10 years, and we’ve mostly been left behind.”

Still, it’s not just the agency itself that will benefit from technological- and process-related change within the FHA. Montgomery said the end goal is to help homebuyers, lenders, and servicers, too.

“We don’t operate in a vacuum,” he said. “We have to operate through lender partners and servicing partners who, in turn, help citizens of our country who want to use FHA. So to the degree that we can wring out those inefficiencies and bring some sort of common sense improvements, I think that makes the process certainly better for the homeowner, maybe for the servicer, and, hopefully, for us.”

Changes don’t happen overnight though. Modernization is on the agenda but, Montgomery said, “We can’t just wave a magic wand.”

“It’s like turning the oil tanker around,” he said. “It’s lumbering and slow, but there’s some common sense things I think we can do that could at least signal to the folks out there that rely on us that we also rely on them—that we heard you and we’re going to make some changes.”

About Author: Rachel Williams

Rachel Williams attended Texas Christian University (TCU), where she graduated with Magna Cum Laude with a dual Bachelor of Arts in English and History. Williams is a member of Phi Beta Kappa, widely recognized as the nation’s most prestigious honor society. Subsequent to graduating from TCU, Williams joined the Five Star Institute as an editorial intern, advancing to staff writer, associate editor and is currently the editor in chief and head of corporate communications. She has over a decade of editorial experience with a primary focus on the U.S. residential mortgage industry and financial markets. Williams resides in Dallas, Texas with her husband. She can be reached at Rachel.Williams@DNews.com.

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