An "unprecedented crackdown." That's how Commissioner David Stevens described a get-tough program that took place under him at the Federal Housing Administration (FHA) from mid-2009 until April of this year. As part of the push, the FHA's Mortgage Review Board issued more administrative actions against lenders in Stevens' first year than it had in the prior eight years combined.

"We take our responsibility to oversee lenders with the utmost seriousness," Stevens told a Senate subcommittee in 2010.

When he resigned a year later to take over as head of the Mortgage Bankers Association (MBA) — the primary lobby for the businesses he'd formerly overseen — Stevens cited the enforcement figures once again as evidence that he had not gone easy on the industry.

In contrast to the image Stevens so carefully groomed, his record as a disciplinarian is based largely on a vastly eased definition of enforcement that inflated the agency's action count. That's according to a review of statistics from the Department of Housing and Urban Development (HUD), which oversees the FHA.

Statistics indicate that the vast majority of matters brought to the mortgagee review board under Stevens were not "fact-based" ones involving misconduct harmful to borrowers or the FHA's insurance fund. Instead, 92% of actions under Stevens were "recertification cases," which generally involve small lenders and brokers who failed to submit paperwork on time — often because they have ceased originating FHA loans or gone out of business. The FHA review board's small office simply mailed registration violation notices to slews of marginal players and then submitted their names en masse to the review board for official action, sources familiar with its activities say.

The FHA staff pushed hard for substantive enforcement against major lenders, HUD sources say, but many became convinced that its leaders were more interested in creating a perception of getting tough than in administering discipline itself.

A major part of creating that image — the inclusion of recertification cases in FHA enforcement statistics — became standard shortly before Stevens' arrival, HUD and the MBA say. The move followed a judicial ruling that such matters need formally board approval. "[The cases] meant nothing and got in the way of meaningful enforcement," said a HUD staffer. "There was no crackdown. … It was just housekeeping, clearing up the paperwork."

There was nothing misleading about Stevens' presentation to Congress of recertification cases as "enforcement actions," said Sarah Tinsley Demarest, a spokeswoman for the MBA, in response to questions emailed to Stevens.

"It is a slippery slope to ignore lenders who fail to follow annual renewal protocols," she wrote. "This was not a big bank, small bank issue. There are thousands of names on that list, both big and small. Taylor Bean Whitaker" — a relatively large mortgage company that collapsed and whose former boss was sentenced to 30 years in prison for fraud — "is not a 'no name' lender."

A HUD enforcement official who spoke at the request of the department's public affairs office and who requested anonymity, credited Stevens with creating a strong enforcement culture during his two years at HUD. "He did bring a culture of risk management," the official said. "That has really sunk in."

Other current and former HUD sources who spoke on condition of confidentiality described the changed handling of administrative actions as a public relations ploy. It appears to have had some success. Stories appeared in the press under headlines like "Housing Agency Flexes Muscle as Loan Defaults Grow." This despite the fact that the FHA pursued only 68 fact-based cases annually on average during Stevens' two-year tenure. The number is up from the years preceding his arrival but still just in line with decade-long averages.

Lists of companies subject to the MRB actions and published in the Federal Register omit major lenders. Instead, they list lenders that either went out of business or voluntarily decided to exit the FHA program. Among a dozen companies recently sanctioned in recertification cases that American Banker tried to contact, several no longer have working phone numbers.

Representatives of most of the entities said they had voluntarily withdrawn from the FHA program. "We only had one [FHA] loan on the books," says Diane Branson, executive vice president of America's Credit Union, which serves military retirees near Washington State's Fort Lewis Army Base. After deciding to quit the program, credit union officials contacted HUD seeking formal decertification. The credit union continued to receive recertification applications and eventually abandoned its delisting, Branson says. "The lack of a formal cancellation was the problem," she says. "Inaccurate reporting" is how she terms her credit union's current listing in the Federal Register. The mortgage review board officially sanctioned and delisted America First last month.

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