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What's happening in the federal IT community
By Tuesday, April 15, 2008 | 11:24 AM
As noted in a long article in Sunday's Washington Post, critics are accusing Housing and Urban Development Secretary Alphonso Jackson, who is resigning in less than glorious circumstances, of being grossly inattentive to the looming housing crisis.
They contend, "Jackson ignored warnings from within his agency, … whose inspector general told Congress that some of the secretary's efforts were 'ill-advised policy' and likely to put more families at risk of losing their homes."
Of course, HUD denies this.
However, during Jackson's era, the story said, "... foreclosures for loans insured by HUD's Federal Housing Administration have risen and default rates have hit a record high."
As also noted in the Post article, FHA Commissioner Brian Montgomery, a former White House political aide with no previous housing experience, said, "It is beyond outrageous for anyone to suggest we would do anything to put FHA at unnecessary risk."
This must mean, I guess, that the increased risk of families losing their homes was a necessary HUD & FHA risk.
That's OK then.
In fact, it must be OK since Montgomery recently won the "annual Lenders One Hero for Housing Award for his efforts on behalf of American homeowners at a challenging time in the housing market."
Of course, one might ask if the award was really on behalf of American homeowners or the 100 plus mortgage bankers that make up Lenders One?
Comments
Commissioner Montgomery must be pleased to have such a staunch supporter.
Let’s start with his bio, which says that he worked at the White House from January 2001 to April 2005. It also says that while there, he “contributed to the policy process on a wide range of issues including the Administration's efforts to boost homeownership, increase access to affordable housing, and to reform both RESPA and the GSEs.”
I guess you can say being at meetings and contributing to the policy process counts as “housing experience” – but let’s not confuse it with having a career dealing with housing issues. I suppose since he was confirmed by the Senate, fours years of contributing to the Administration’s policy process at the White House qualifies one to be an FHA commissioner, but I don’t find that particularly reassuring.
You’re absolutely right, Secretary Jackson was pushing for legislation since the fall of 2005 to get “safe” FHA mortgages – but safe for whom? FHA insurance, paid by the borrower, protects the lender in case of default.
FHA does this because, as says Alex Pollock, a fellow at the American Enterprise Institute and former president of the Federal Home Loan Bank of Chicago, said on Thursday in a Forbes article titled “FHA’s Risky Business” (see http://www.forbes.com/home/2008/04/16/mortgages-fha-congress-biz-beltway-cx_md_jz_0417loans.html), "FHA delinquencies tend to be quite high. They are substantially higher than the prime market--not as high as the subprime market, but nonetheless quite high. You're in a sector of the market that is by definition risky."
Let’s also not forget that the White House and HUD pushed very hard for FHA to be able to offer a zero down payment option just like subprimes, which Congress wisely killed. I assume that Commissioner Montgomery, working at the White House as he did, fully supported this dubious and risky idea.
Again, it is true that the foreclosure starts rate decreased four basis points for FHA loans (from 0.95 percent to 0.91 percent) in the fourth quarter of 2007, but the delinquency rate – a precursor of possible foreclosure – also increased 46 basis points for FHA loans (from 5.54 percent to 6 percent) in the same quarter. Given the state of the “rough patch” this economy has been going through, I doubt the first quarter of this year will continue to see a decrease in foreclosure rate.
I’m glad that Dodd or Frank have nice things to say about the Commissioner - but that in itself worries me (and a lot of others) as well. It likely means, as the Wall Street Journal recently noted in an article titled “Uncle Subprime”, (see http://online.wsj.com/article/SB120718217009085001.html), volunteering U.S. taxpayers to insure $300 billion (Frank’s number) or $400 billion (Dodd’s number) in mortgages with underwriting standards to be named later. I find that outrageous.
Robert Charette | Friday, April 18, 2008 | 6:11 PMYou don't know what you're talking about. There were many falsehoods in the Post story - Mr. Montgomery did have four years of housing experience before he became FHA Commissioner - if you took the time to read his bio, you'd know that.
In addition, Secretary Jackson have been pushing for legislation since the fall of 2005 that would enable homebuyers to avoid sub-prime loans and get safe FHA mortgages instead. The reporter knew this, but chose to twist the facts. Also, foreclosure rates on FHA loans having been going down, not up.
If you don't think Mr. Montgomery is doing a good job, ask the leadership in the senate and the House who are working on the housing crisis - like Senator Dodd and Barney Frank. Go ahead, ask them - unless you don't want to hear them say good things about him.
Unlike the Washington Post, next time you write about Mr. Montgomery, why don't you stop being so biased and do some research first.
I await your reply - it will be very telling to see what kind of person you are.
papahoya | Thursday, April 17, 2008 | 2:20 PM