7 candidates to lead Fannie and Freddie's regulator

July 8, 2021 3:00 AM

WASHINGTON— Following President Joe Biden’s June 23 ouster of Mark Calabria, speculation has intensified about the administration's pick to run the Federal Housing Finance Agency and therefore chart a new path for the mortgage giants Fannie Mae and Freddie Mac.

It remains to be seen how quickly Biden will nominate a permanent FHFA director. After all, he has yet to send Congress a name for another key financial regulatory position: the head of the Office of the Comptroller of the Currency. But given how quickly the administration moved to fire Calabria after a key Supreme Court decision and how important housing is to the economic recovery, a nomination could come soon.

After the Supreme Court ruled June 23 that the president has the authority to fire the FHFA director at will, Biden exercised that power almost immediately. Later in the day, senior FHFA official Sandra Thompson was named acting director of the agency.

Calabria, a libertarian economist appointed by then-President Donald Trump, took the helm of the FHFA in April 2019 and made clear his goal from the start of putting the government-sponsored enterprises on a path out of conservatorship.

While Biden has not made clear his stance on GSE reform, his administration is likely to deviate from Calabria on several key policy decisions. That could include relaxing restrictions that Calabria codified with then-Treasury Secretary Steven Mnuchin on GSE purchases of certain “high-risk” loans, which many worry will limit credit access.

Though it is still unclear whom the administration is eyeing for the job, here is a list of potential FHFA chiefs in the Biden administration.

Sandra Thompson

Thompson could be a natural choice for Biden to nominate as FHFA’s permanent head, given that she is already serving in an acting capacity and is familiar both to lawmakers and staff at the agency.

Thompson, who was most recently the deputy director of the FHFA’s Division of Housing and Mission Goals, has been at the agency since 2013. Before joining FHFA, she worked for 23 years at the Federal Deposit Insurance Corp., ultimately serving as the director of risk management supervision.

In a statement after Biden appointed her to serve as acting director, Thompson said she is “committed to making sure our nation’s housing finance systems and our regulated entities operate in a safe and sound manner.”

“We can accomplish this, and at the same time have a laser focus on mission and community investment,” she said, alluding to one of the Biden administration’s primary housing goals. “There is a widespread lack of affordable housing and access to credit, especially in communities of color. It is FHFA’s duty through our regulated entities to ensure that all Americans have equal access to safe, decent, and affordable housing.”

In a tweet following Thompson’s appointment, Calabria called her “an outstanding public servant” and a “regulator’s regulator.”

Christopher Whalen, chairman of Whalen Global Advisors, argued in an op-ed for National Mortgage News that Thompson “would make an excellent candidate as FHFA director.”

“She provides Biden a great opportunity to recognize a leading female executive in the mortgage industry,” he said.

Mark Zandi

Zandi is currently the chief economist at Moody’s Analytics and a member of the board of directors of the mortgage insurance giant MGIC.

His name has frequently been mentioned as a top contender for the FHFA director role, including before the Supreme Court’s decision in Collins v. Yellen.

But the Revolving Door Project published a blog post in February warning Biden against nominating Zandi, expressing concerns about his ties to the mortgage industry.

Still, Zandi is not only an influential voice on housing policy, but also on inflation, unemployment and government stimulus. He has made frequent media appearances and penned a number of op-eds for CNN, which have caught the attention of the Biden administration. The Department of Housing and Urban Development circulated an op-ed that Zandi wote with Jim Parrott, a fellow at the Brookings Institute, in June that argued Biden’s American Jobs Plan is “the most significant housing policy effort in a generation.”

In a June 24 research note, Ian Katz, a director at Capital Alpha partners, noted that Zandi “could be less objectionable to Republicans than other potential nominees” and could have the support of moderate Democrats as well.

Susan Wachter

Wachter, a professor of real estate and finance at the University of Pennsylvania’s Wharton School, has been a proponent of spinning off Fannie Mae and Freddie Mac into public mortgage market utilities, a method of reform that small lenders have previously supported. She testified in front of the Senate Banking Committee in 2019 in support of designating the government-sponsored enterprises as “systemically important financial market utilities.”

In December 2020, Wachter co-authored a paper discussing the viability of converting Fannie and Freddie to public utilities. She also wrote a separate paper in 2019 with the National Association of Realtors outlining how the “utility model” of reform would work in practice.

Bloomberg reported in January that Wachter was one of the candidates the Biden transition was eyeing for the FHFA role. She would likely be a natural choice if the Biden administration decided that it wanted to move forward with the “utility model” path to reform.

Eric Stein

Stein, a special advisor to former FHFA Director Mel Watt from 2014 to 2019, served on the Biden transition team and specifically advised officials on HUD and FHFA. Previously, he also served as deputy assistant secretary for consumer protection in the Treasury Department during the Obama administration, where he worked on legislation to create the Consumer Financial Protection Bureau in 2011. Stein currently serves as senior vice president at the Center for Responsible Lending as well as senior vice president at the Center for Community Self-Help.

Stein co-authored a paper in March 2020 for CRL with Bob Ryan — another potential FHFA nominee—arguing that Fannie and Freddie should be spun off into public utilities.

“Utility-like regulation would allow the GSEs to continue to operate at low risk and in a way that provides broad access to affordable mortgage credit nationwide,” the paper read. “Removing that check on GSE returns on equity would lead to greater risk and less systemic stability, less pooling of risk and access to credit, and higher prices for America’s homebuyers.”

Bob Ryan

Ryan, who coauthored the March 2020 paper with Stein on the “utility model” approach to GSE reform, is the co-owner of Parrott-Ryan Advisors, which he started after leaving FHFA in 2019. At the agency, Ryan served as special advisor to then-FHFA Director Mel Watt, and was also the acting deputy director for the agency’s Division of Conservatorship from 2015 to 2018. From 2009 to 2012, he served in a variety of roles at HUD, including acting Federal Housing Administration commissioner, senior advisor to then-HUD Secretary Shaun Donovan and chief risk officer at the FHA.

After leaving HUD, Ryan was the senior vice president of capital markets at Wells Fargo Home Mortgage.

Ryan has co-written a number of papers for the Urban Institute in the past year that explore several of Calabria’s policy decisions, including the post-conservatorship capital framework. Ryan, Zandi and Parrott argued that that framework “would ultimately take the GSEs and the housing finance system in the wrong direction.”

Bharat Ramamurti

Ramamurti is currently deputy director of the National Economic Council for financial reform and consumer protection. He served for seven years as a top economic advisor to Sen. Elizabeth Warren, D-Mass., where he led her investigation of Wells Fargo and advised her 2020 presidential campaign.

Ramamurti emerged as a particularly powerful voice at the outset of the coronavirus pandemic when he became the first member of the COVID-19 Congressional Oversight Commission, which was tasked with overseeing the Treasury and Federal Reserve’s use of stimulus.

Before joining the Biden administration, Ramamurti worked as the managing director of corporate power at the Roosevelt Institute.

If Biden is looking for a progressive figure to run the FHFA, Ramamurti could be a natural choice given his popularity with the left. Still, his confirmation process would likely be an uphill battle unless he was able to get support from key Republicans or moderate Democrats.

Meg Burns

Currently the executive vice president at the Housing Policy Council, Burns spent four years at FHFA starting in 2010, where she held a number of roles including senior associate director for housing and regulatory policy. While at the agency, she also served as the senior associate director for congressional affairs and communications, and testified several times in front of Congress.

Prior to her time at FHFA, Burns spent 19 years at HUD, where, among other positions, she served as the director of the FHA’s Office of Single Family Program Development. After leaving FHFA in 2014, Burns joined the Collingwood Group as managing director.

At HPC, Burns has been particularly active on rulemaking around the “qualified mortgage” standard and the so-called “GSE patch” that allows loans backed by Fannie and Freddie to be considered QM.