David Stevens: Calabria may be “the absolute worst person for this job at this time”
Over the last several weeks, the housing industry’s finance sector has lobbied the government to set up a federally-backed liquidity facility for U.S. mortgage servicers to address a substantial increase in forbearance requests from the nation’s financially strained borrowers. HousingWire Digital Producer Alcynna Lloyd sat down with the former head of the Federal Housing Administration and former Mortgage Bankers Association President David Stevens, who now serves as CEO at Mountain Lake Consulting to gauge his thoughts on whether or not the government has done enough to address the issue.
Below you will find two of the six questions Stevens answered with the full audio in a video at the end. This interview has been lightly edited for length and clarity.
Alcynna Lloyd: You have been very outspoken on the forbearance issue and what the Federal Housing Finance Agency and GSEs should be doing. Do you think their recent efforts have been enough to address the industry’s forbearance concerns?
David Stevens: I’m glad they did something, but it’s a little bit late. We already saw significant credit tightening as a result of the FHFA not stepping in. Instead of having servicers be required to advance forbearance payments for the full term of forbearance, they kept it at four months only at which point the GSEs would then take over the advance requirements. The problem is that in that four-month period, we could see an extraordinary amount of liquidity being advanced, and unlike other forbearance programs that have existed prior to the CARES Act, I don’t think we’ll get any repayment back until the borrower ends his or her forbearance plan and begins to repay their advances, which could take months or years. So, there’s still an outrageous amount of liquidity being advanced for servicing that Freddie Mac and Fannie Mae own, and it’s putting a really outrageous amount of liquidity pressure onto the nonbank community.
Alcynna Lloyd: FHFA Director Mark Calabria recently said that no nonbank is too big to fail and that he expects forbearance requests to remain at low. The industry has said otherwise and data shows that forbearance has already passed Calabria’s projections. Do you think anyone can change Calabria’s mind or philosophy?
David Stevens: Mark is a libertarian. His perspective is that the government should not intervene in housing markets, and he’s been very vocal over the years about the role of FHA and the GSEs being too big. I believe he is exercising his economic philosophy that the markets will improve without intervention. I think his recent comments were blasphemous and they aided in additional tightening of credit. The statements also reflect his lack of experience in the business. He’s never been in the industry; he’s always been an economist. I’ve seen much more aggressive positions taken about his job right now. I think Mark is being naive, and putting the housing finance system at risk. More importantly, this is going to have huge negative pressure on an economy that’s already struggling. The housing system is 40 basis points of the gross domestic product and about a fifth of GDP is housing. This will be a core component of economic recovery, and you want it to be strong as we go back to work. Mark is doing anything but providing that support.
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