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Interview with Sandra Thompson, Deputy Director, Federal Housing Finance Agency

Dan Green
The Mortgage Reports contributor

Meet Sandra Thompson, Deputy Director, Federal Housing Finance Agency

Tell us a little about yourself.

I started my career at Northwestern Mutual Life Insurance Company in Milwaukee and then moved to Goldman Sachs in New York, but then switched tracks with a move to the public sector in 1990 where I would serve on the front lines of two financial crises.

I first served as the Director of Securitization at the Resolution Trust Corporation (RTC), which was established to deal with the disposition of mortgage loan assets from the savings and loan crisis.

Following the RTC, I worked at the Federal Deposit Insurance Corporation (FDIC), most recently as Director of Risk Management Supervision, which included leading the FDIC’s supervisory operations during the most recent financial crisis.

I came to the Federal Housing Finance Agency (FHFA) to address what I believed was the single remaining critical issue impacting our economy — the housing market.

After this, I can assure you that I am not planning to work on another crisis.

What does it mean to be Deputy Director of the Division of Housing Mission and Goals for FHFA?

As a Deputy Director at FHFA, I focus on a wide range of issues that impact millions of homeowners, as well as lenders, servicers and investors.

The decisions we make in our division lead to changes in the housing finance market and affect all of its stakeholders.

It’s a big responsibility, but also an interesting and challenging job.

Take us through your typical day

Meetings, meetings and more meetings.

I spend a lot of time with both FHFA staff and external stakeholders on a wide variety of topics. I might start my day discussing capital and liquidity requirements for nonbank servicers, and then work on issues related to private mortgage insurers.

I’ll meet with the staff working on multifamily housing issues; the research staff and the staff that works on the mission of affordable housing goals for Fannie Mae and Freddie Mac; and the Affordable Housing Program for the Federal Home Loan Banks.

We may discuss proposals and recommendations on Guarantee Fees, Loan Limits or the FHFA House Price Index.

I might have a conference call or a speaking engagement on housing policy issues or an Enterprise program like the Home Affordable Refinance Program, also known as HARP.

In between meetings, I would likely review staff recommendations on housing policy issues, or meet with one or more of the other Deputy Directors to try to resolve a sticking point (yes, this is a large organization that needs a personal touch to make it work).

Prior to your role with the Federal Housing Finance Agency, you served as Director of the FDIC. What did you learn in that position that has helped you at FHFA?

One important theme has carried over from FDIC to FHFA and that is — Safety and Soundness and Consumer Protection/Access to Credit are not mutually exclusive.

At FHFA, our statutory mandates include ensuring: (1) safety and soundness, (2) resiliency, (3) liquidity, (4) stability, and (5) broad access in the housing finance markets.

Some see conflicting priorities within these goals, but as we often said in my days at FDIC, when talking about safety and soundness and consumer protection, they are two sides of the same coin.

Now at FHFA, my responsibilities are focused on the secondary market, and the work is different. But there is still the same need to make sure that our regulated entities are both operating in a safe and sound manner and providing liquidity in a way that helps enable broad participation in a stable housing market.

I can’t say this enough — when we talk about access to credit — some tend to think that safety and soundness gets thrown out the window. I believe that you need to have balance.

Safety and soundness and access to credit are not mutually exclusive.

While at the FDIC, you oversaw Risk Management Supervision. Of what are you most proud?

At FDIC, I was most proud of my staff.

I was responsible for a nationwide workforce of approximately 3,000 examiners who worked day and night in the midst of the worst financial crisis since the Great Depression to give the nation comfort in the safety and soundness of the banking system.

I take great pride in having been associated with people who contributed so significantly to public confidence.

You’ve had the pleasure of moderating many of the FHFA “Town Halls” held nationwide. What themes have you noticed from city-to-city?

There is still a lot of confusion about all of the loan modification and refinance programs that are available to homeowners.

Many people are overwhelmed with information received through telephone and mail solicitations.

A lot of programs have evolved over time and these changes contribute to the confusion.

Borrowers who were not eligible for certain programs may now be eligible because the programs have been updated.

We need to reinforce the message that there are relevant programs for both current and delinquent borrowers who want to reduce their mortgage payments, and we need to do a better job explaining the program parameters.

As of today, there are more than 600,000 U.S. households “in the money” for the HARP refinance program, but fewer than 12,000 HARP loans close each month. What’s holding homeowners back, do you think?

Borrowers are just inundated with information, and I really think that there is a lack of understanding about the different programs coupled with a lack of trust.

Before we launched the national HARP outreach initiative, we talked with several focus groups of borrowers who reiterated this very issue.  Many said they were overwhelmed with information and didn’t know who or what to trust.

They ask themselves: “How do I know this information is correct?  What if this is a scam?”

This is where we developed the idea of communicating information through a “trusted source” — persons or organizations who can act as a bridge between the industry and consumers. It might be a neighbor, someone you know from your house of worship, or a respected community organization.

As brokers of information, these people can play a significant role in reaching the HARP-eligible homeowners across the country.

While we continue our efforts to get the word out, it is important to note that more than 3.3 million homeowners have refinanced through HARP to date, which we consider a success.

How do you see mortgage rates affecting home values through the rest of 2015 and into 2016?

Like everyone else, I think there will be a slight increase in mortgage rates over the next 18 months, but I don’t think the increases will be material.

If this is the case, there should be some moderation in home price appreciation.

Price increases are always influenced by other factors such as income and employment growth, and income growth has been anemic to date, while employment growth has been relatively uneven.

Recovery in the housing sector has not been balanced. Home prices have increased in some neighborhoods but not in others.

What are some of the FHFA’s key policy initiatives for 2016?

My Division will likely continue much of the work we began in 2015.

We plan to closely monitor the implementation in 2016 of two key initiatives that were released earlier this year — capital and liquidity standards for nonbank servicers and the eligibility standards for mortgage insurers.

In addition, we will continue working with Fannie Mae and Freddie Mac on credit risk transfer programs, expanding access for small and rural borrowers, and reducing their severely delinquent loans and real estate owned inventories.

There will be further clarification of the Representation and Warranty Framework, hopefully including an Independent Dispute Resolution process.

We will look for ways to facilitate broad but responsible access to credit, and we’ll monitor the affordable housing initiatives at the Enterprises and the Federal Home Loan Banks as well as a range of other issues.

What’s your outlook for the U.S. mortgage market over the next five years?

It is difficult to predict what will happen in the next two years, let alone the next five.

I do hope we can get to some sort of “new normal” standard — where borrowers, lenders and investors regain confidence in the housing market.

I don’t think the lack of confidence that currently exists by most of the parties in a mortgage transaction will disappear overnight — confidence has to be earned and that takes time.

I know that Fannie Mae and Freddie Mac are working to do their part to restore confidence in the system and others are doing the same. We did not get to this point overnight, and it will take time for the mortgage market to fully recover.

But we will get there one step at a time.

What are some of your favorite destinations for real estate and housing market news?

The Mortgage Reports (of course)! as well as The Wall Street Journal, American Banker, Inside Mortgage Finance and National Mortgage News.

I also have a number of subscriptions to different housing-related trade publications.

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Sandra Thompson serves as Deputy Director of the Division of Housing Mission and Goals.  She oversees FHFA’s research activities, policy development and analysis, the mission and goals of Fannie Mae and Freddie Mac, and the housing finance and community and economic development mission of the Federal Home Loan Banks.

In support of FHFA’s mission and the Director’s responsibilities as a member of the Federal Housing Finance Oversight Board, the Financial Stability Oversight Board, and the Financial Stability Oversight Council, her Division is also responsible for overseeing and coordinating FHFA activities involving data analyses, and analysis affecting housing finance and financial markets.  

Prior to joining FHFA, Thompson worked for the Federal Deposit Insurance Corporation (FDIC), where she held several positions over 23 years, most recently as Director, Division of Risk Management Supervision.  During her time at FDIC, Thompson led the agency’s examination and enforcement program for risk management and consumer protection at the height of the financial crisis. She also led the FDIC’s outreach initiatives in response to a crisis of confidence in the banking system. She previously served as Director of Securitization for the Resolution Trust Corporation, Goldman Sachs in New York City and Northwestern Mutual Life Insurance Company in Milwaukee, Wisconsin.

Thompson is a graduate of Howard University in Washington, D.C.

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