When David Stevens took over in July 2009, the Federal Housing Administration was in such dire financial straits that he says there was a real threat of the agency being temporarily shut down.
"I actually believe we protected FHA from the risk of external intervention," Stevens said in an interview Thursday, after announcing he would leave the agency next month.
"We've shown how you can run a business in a responsible way with safety and soundness," he said. "If you do things prudently, you can remove the concerns of others coming in to intervene."
Stevens said he told the White House a few months ago that he planned to leave as part of the "“natural exodus" of administration officials around the midterm elections.
A former executive at Wells Fargo & Co. and Freddie Mac, Stevens made changes no FHA commissioner had ever attempted before, at a time when the housing market was in a freefall.
"It's a grueling job and because of his expertise in the mortgage business and the environment we're in today, he was much more than the typical FHA commissioner," said Brian Chappelle, a partner at the Washington consulting firm Potomac Partners.
Last year Congress passed FHA reform legislation Stevens had advocated. He pointed out that it garnered the highest level of bipartisan support of any bill in the Obama administration. (It got only four "no" votes in the House, he said.) The measure raised mortgage insurance premiums back to levels of a decade ago to help FHA offset the rising number of delinquent loans.
Stevens created an office of risk management and required higher down payments from borrowers with low credit scores.
Perhaps most importantly, he cracked down on mortgage originators with high default rates. He also required that lenders be on the hook for any faulty loans originated by mortgage brokers and eliminated the "mini-Eagle" designation for brokers.
"The actions he took against Taylor Bean & Whitaker and some other lenders really changed the industry," Chapelle said. "He gave people confidence that FHA was in good hands."
Still, dilapidated technology and difficulty analyzing its own data made it hard for FHA to prevent defaults on its $907 billion mortgage portfolio. FHA's capital reserve ratio was 0.50% at the end of Sept, down slightly from 0.53% a year earlier, still well below the congressionally mandated minimum of 2%. Stevens would not say what he plans to do next, though he expects to stay in Washington.
He said he is leaving the agency, which is part of the Department of Housing and Urban Development, in good hands. Potential successors, he said, include Robert Ryan, FHA's chief risk officer; Carol Galante, HUD's deputy assistant secretary for multifamily housing; and Vicki Bott, a HUD deputy assistant secretary. "We built a deep bench of mortgage expertise, so it's not a panic environment," Stevens said.
As for the housing market, Stevens said, "I think we're past midway" on the road to recovery. "It's easy to try to claim we're in some disastrous shape. But all the numbers point to the fact that we're in a delicate period of near-bottom."
