Fannie Mae-No Politics (FNMA)

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By GRETCHEN MORGENSON
FEBRUARY 29, 2016
A nonprofit watchdog group on Monday called for an investigation of David H. Stevens, chief executive of the Mortgage Bankers Association, arguing that he may have violated ethics laws relating to his previous position as commissioner of the Federal Housing Administration.

The National Legal and Policy Center, a right-leaning ethics-in-government group, urged the United States attorney for the District of Columbia and the inspector general at the Housing and Urban Development Department to conduct an official review of Mr. Stevens’s activities while he was at HUD and after he left the agency in March 2011 to lead the mortgage association, one of the most powerful lobbying organizations in Washington.

An investigation, the center said, would determine whether Mr. Stevens had violated federal rules barring former government officials from “communicating or appearing on behalf of persons or entities with respect to matters in which the former officials ‘personally and substantially participated’ during their government service.”

The ethics group also asked the government officials to look into whether Mr. Stevens had violated the law by trying to influence matters of interest to the mortgage bankers for a brief period when he was still in the government but had accepted the lobbying post. He was the F.H.A. commissioner, a post within HUD, from mid-2009 through March 2011.

Mr. Stevens declined to comment. John T. Mechem, a spokesman for the association, replied on his behalf.

“Since ending his government service, Dave has regularly consulted with attorneys inside and outside M.B.A. to make sure that he and the association are always in full compliance with the law,” Mr. Mechem’s statement said. “Outside counsel to M.B.A. has specifically reviewed Dave’s activities on behalf of M.B.A. and its members and has confirmed that Dave has operated fully within the letter and spirit of the lobbying laws and ethics rules.”

The statement added that the “unfounded allegations are part of a concerted campaign” by those with an apparent financial incentive to discredit Mr. Stevens and his work at the lobbying group.

The request for an investigation from the National Legal and Policy Center is the second such call for scrutiny of Mr. Stevens’s activities after he left government.

In mid-December, the nonprofit Campaign for Accountability asked the Justice Department to investigate Mr. Stevens for possible violations of so-called revolving door laws.

A spokesman for the accountability group said the Justice Department had acknowledged its request in December, but that it had heard nothing since.

Mr. Stevens’s activities were the subject of a Dec. 7, 2015, article in The New York Times. It detailed behind-the-scenes efforts of former top housing officials to help large banks dismantle Fannie Mae and Freddie Mac, the mortgage finance giants, and capture greater profits in the $5.7 trillion home loan market.

In seeking an investigation, the legal and policy center said it had identified more than 25 potential ethics violations by Mr. Stevens.

Before Mr. Stevens announced that he was leaving his government post for the Mortgage Bankers Association, he was a participant in deliberations over the status of Fannie Mae and Freddie Mac, which were taken over by the United States in September 2008, just as the housing market collapse erupted into the worst economic and financial crisis since the Depression. The companies remain in conservatorship under the oversight of the Federal Housing Finance Agency.

The legal and policy center contended that as head of the association, Mr. Stevens had lobbied on some of the same issues that he had worked on as the F.H.A. commissioner. It cited correspondence he had submitted to housing agencies as they deliberated new rules for the mortgage industry.

In calling for investigations, the ethics group also noted numerous meetings Mr. Stevens had attended with top officials at HUD, the White House and the Federal Housing Finance Agency.

Mr. Stevens’s communications with federal employees on these matters may have violated ethics rules, the group said, because the government still directly oversees Fannie and Freddie, which operated before the takeover as quasi-independent government-sponsored enterprises to support the housing industry and encourage homeownership.

According to the group’s requests, the matters Mr. Stevens took up on behalf of mortgage bankers involved rules aimed at reducing the issuance of high-risk home loans. Soon after he left HUD, for example, Mr. Stevens wrote a letter to that agency and other banking regulators that was critical of a proposed rule that would require issuers of mortgage securities to hold onto at least 5 percent of any security.

The rule was intended to discourage mortgage issuers from dumping high-risk loans into pools and escaping responsibility when they failed. This practice generated billions of dollars in losses for unsuspecting investors during the credit crisis.

In April 2012, Mr. Stevens sent a private email to Richard Cordray, the head of the Consumer Financial Protection Bureau, and a colleague, discussing another proposal to reduce mortgage risks. Known as the qualified mortgage rule, it required lenders to adhere to certain standards when making a loan, like ensuring a borrower had the ability to repay.

In the email, Mr. Stevens warned Mr. Cordray that the rule, as proposed, “will likely cause significant contraction in new mortgage lending” and could hurt the overall economy.

“Look, I know I head this M.B.A.,” Mr. Stevens wrote in the email, “but I am also a 30-year veteran of this industry and someone who spent a couple of years inside working on policy as you both know.”

The consumer bureau posted Mr. Stevens’s email on its website as an ex parte communication, indicating that it had not been submitted publicly.

“Even by Washington’s current low standards,” Ken Boehm, chairman of the National Legal and Policy Center, said in a statement, “Stevens was particularly brazen in apparently ignoring the pertinent statutes and ethics regulations.”

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