In the last year Joseph J. Murin and Brian Montgomery presided over the resurgence of government lending in the mortgage market. Now they want to help fix Fannie Mae and Freddie Mac.
Murin, who resigned as the president of the Ginnie Mae last week, and Montgomery, who left the Federal Housing Administration (FHA) in January, announced Tuesday that they have joined a Washington consulting firm. Formerly Capital Financial Solutions, the firm has been renamed Collingwood Group.
Among other things, Collingwood plans to advise small banks on disposing of toxic assets.
Murin said in an interview that he also hopes to apply this expertise at Fannie and Freddie. The firm already works as a subcontractor for the two government-sponsored enterprises, which have been operating in federal conservatorship for nearly a year.
"We're certainly going to try and go into Fannie and Freddie and see if we can't reset the bar in relation to management of these assets," he said. "How we handled assets years ago does not apply to how we're handling them today because there are just too many of them in the marketplace."
Capital Financial was co-founded in 2007 by Brian O'Reilly, a former director of automated underwriting at Fannie, and Tim Rood, a former executive at Freddie and at the real estate services giant First American Corp. in Santa Ana, Calif.
Murin said the firm will focus on a handful of areas specific to the current housing crisis.
"We're getting into the ditch with a pick and a shovel," he said. "We're not going to be out of the toxic asset business in 2009 or 2010; it's going to be around for a while."
He suggested that banks large and small "step up" and acknowledge the problem by embracing new technologies and methods.
"The market is in need of taking a step back and evaluating what's going forward, particularly in light of the GSEs, the regulatory front and how they're going to dispose of toxic assets," he said. "This has hit the industry real hard."
While he was at Ginnie Mae, Murin proposed that the agency try to bring more warehouse lending capacity to the mortgage industry.
The idea was that Ginnie would take possession of loans three days after closing, instead of the 15 to 45 days it typically takes to put the mortgages in securitization pools.
"It was positioned to be responsive to Treasury, acting as an agent of Treasury, and what goes on now that I'm gone is out of my hands," Murin said Tuesday.
He suggested that regulators ease the capital requirements tied to warehouse lines of credit, which is one reason banks have stopped offering the lines, making it hard for nonbank mortgage companies to fund their loans.
Dropping warehouse lending "is the easiest thing to do to trim your balance sheet," he said.
Murin ran Ginnie for about a year. Montgomery was named the FHA's commissioner in 2005.
Ginnie Mae's issuance of mortgage-backed securities has soared in the past year, hitting $43 billion in June, compared with $27 billion a year ealier.
Collingwood's clients include Interthinx, a unit of ISO Properties that provides fraud and risk mitigation software and was Capital Financial's first client, said O'Reilly.
"As the mortgage industry became more Washington-centric, there was a universe of businesses that need to understand how to face off with all the regulatory entities and the GSEs," he said.