David Stevens arrived as a commissioner at the Federal Housing Administration in 2009 vowing to restore financial discipline to a government housing body facing the stresses of a post-crash world. A former mortgage banker himself, Stevens, now 54, bolstered the agency's finances and pursued alleged wrongdoing at nonbank lenders including Berkshire Hathaway and Goldman Sachs & Co. affiliates.
One group the FHA did not feud with during Stevens' tenure: top industry players, such as Bank of America Corp. and Wells Fargo & Co. A collection of emails between Stevens and the Mortgage Bankers Association may help explain why.
The communications reveal that while at the FHA, Stevens enjoyed close social and professional ties with the mortgage industry's main lobby — a group whose members originated roughly $300 billion in FHA-guaranteed loans last year.
Stevens turned to the MBA for policy memos, was copied on its internal lobbying strategy debates and asked its boss at the time to devise "an excuse" for him to attend one of its conferences.
The emails and Stevens' calendar, obtained from the Department of Housing and Urban Development under a Freedom of Information Act request, suggest that the sort of close ties between regulators and the regulated that have been blamed for contributing to the housing crash were alive and well at Stevens' FHA. This, despite the fact that shoddy underwriting practices among MBA members have caused mass defaults and hundreds of billions of dollars in government-guaranteed losses.
Stevens disputes the notion that he was overly close to the MBA. He cited what he calls an unprecedented number of FHA administrative actions during the housing collapse and his own repeated statements that the industry needed to accept responsibility for its failings. Stevens also insisted, along with an MBA spokesman, that he maintained an appropriate relationship with the MBA while at the FHA.
"I'll be the social secretary"
As a longtime former mortgage banker who worked at Long & Foster, Wells Fargo and Freddie Mac, Stevens may have fit right in at events like an October 2009 San Diego mixer where the Beach Boys performed or a June 2010 event in Puerto Rico. For the latter event, Stevens received an email from John Courson, his predecessor as MBA boss.
"Marcia and I were thinking about bailing out after Friday's morning session and heading to Old San Juan for lunch and browsing and returning for the luau," Courson wrote in a note inviting Stevens to come along. Stevens tells American Banker he turned down the offer.
"I had to clear everything with [HUD's ethics division] and make sure any event was widely attended," he says.
In other instances, Stevens was the one making the invitations. "Let me know if there are eny [sic] Sunday evening events that would be fun to connect at," Stevens wrote Courson on May 2, 2010, shortly before an MBA conference in New York.
"I will be the social secretary for [Stevens' wife] Mary and you on Sunday evening in New York," Courson responded.
Steven also wrote Courson in March 2010 saying he was "Looking for an excuse to attend the mba presidents conference" to be held at Barton Springs Resort & Spa in Austin, Texas. "Let me know if there is any role there." Courson answered: "will get back to you with specific ideas." Stevens ultimately passed up the event and says there was nothing inappropriate about asking for "an excuse" to attend the MBA presidents conference, given that the MBA's events "bring together senior executives from across the real estate finance world."
Can you write a memo?
Stevens' coziness with Courson extended to the policy arena. In a series of emails written in May 2010, Stevens received a note from a Treasury official asking why the FHA was opposing the Merkley mortgage amendment, which sought to prohibit banks from paying mortgage brokers bonuses for selling borrowers above-market interest rate loans. Such "yield-spread premium" payments were reviled by consumer advocates for encouraging brokers to trick borrowers into taking out high-cost loans. They were also defended by the MBA, whose members had the potential to earn additional profits.
"We understand you have concerns" about the Merkley amendment, senior Treasury attorney Dan Sokolov wrote Stevens in May 2010. "We don't have a good handle on what they are."
Stevens forwarded the note to MBA boss Courson, along with a request for the MBA's take. "Cab [sic] one of your people write a short memo to me on this?" Stevens asked. "We are on it," Courson replied.
"Given its role facilitating housing and housing finance, FHA is a critical bridge between other policymakers and the industry," Stevens said in response to a question about why he forwarded the Treasury official's email on the Merkley Amendment directly to Courson. Stevens says he also talked to academics, nonprofit officials and other nonindustry groups. "I wanted the entire picture," says Stevens.
Other emails suggest MBA officials were under the impression it was permissable to let Stevens in on informal discussions on lobbying strategy, including those that involved how the FHA could be of use to the industry lobby.