1. FHA Under New Command
When the FHA announced in late September that it was hiring a chief risk officer—for the first time in the agency’s 74-year history—it was taking preventive action. The agency had seen the market share of FHA-insured mortgages grow to almost 40 percent from about 4 percent four years ago, and its new chief, David Stevens, was not taking any chances with financial safety. When the agency’s capital-to-insurance ratio had dipped below 2 percent in one of its reserve accounts, Stevens—a veteran mortgage and real estate executive who has held key posts at Wells Fargo, Freddie Mac, and Long & Foster—immediately took steps to assess and manage FHA’s risk. The government insurer hasn’t had a major technology upgrade or staff increase in more than a decade, yet demand for the FHA’s stabilizing presence continues to grow. Can Stevens meet the demand without jeopardizing safety and soundness? Given the no-nonsense steps he’s taken to shore up his agency’s credit position, the answer appears to be yes.
2. Bernanke’s Second Term
Ben Bernanke—appointed in September to a second four-year term as Federal Reserve chair—is nothing if not innovative. When the Federal Reserve’s conventional monetary policy tools failed to shore up mortgage lending in 2008, the Fed intervened by committing up to $1.25 trillion to purchase Fannie Mae and Freddie Mac mortgage-backed securities and another $200 billion to purchase their debt. That action is widely credited with keeping mortgage rates at historical lows and putting the brakes on a market that was at risk of free fall. Then, in another unprecedented step, Bernanke committed Fed funds to the purchase of commercial mortgage-backed securities to help thaw those credit markets, though the jury is still out on whether the agency’s commitment is big enough—and for a long enough duration—to do the job.
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