The departure of the head of the Federal Housing Administration is considered a loss to the agency and the mortgage industry by her peers on both sides of the isle. Word of the departure comes as the agency has been criticized for its handling of indemnifications.
Federal Housing Commissioner Carol J. Galante has notified her staff that she is leaving the Department of Housing and Urban Development later this year.
Galante was originally named acting FHA commissioner by President Barack Obama in July 2011. She was subsequently nominated by the president to permanently fill the post and was ultimately confirmed by the Senate as Assistant HUD Secretary and Federal Housing Commissioner in December 2012.
In a message to FHA staff, Galante explained that she will assume the I. Don Terner Distinguished Professorship in Affordable Housing at the University of California, Berkeley — where she earned a masters degree. She already serves at the university as the director of the Berkeley Program in Housing and Urban Policy and co-chair of the Fisher Center on Real Estate Policy Advisory Board.
She begins her new role in January 2015.
“While I am excited about California weather and tossing out my ice scraper, I will miss working with all of you to continue the important work we have been doing over the past several years,” Galante said in the note. “When I started as the deputy assistant secretary for multifamily housing we were still recovering from the economic crisis and the market was far from stable. Now because of your efforts, we have helped our housing market come back. Homeowners’ equity is now over $10 trillion, foreclosure starts are at their lowest levels since 2005, and American families are on pace to purchase over 5 million homes this year alone.”
Galante’s announcement comes following Friday’s report from the Office of Inspector General Department of Housing and Urban Development criticizing FHA for not always billing mortgagees for FHA single-family loans that had an indemnification agreements and losses to HUD.
The report, FHA Indemnification Recovery Process, said that FHA didn’t bill lenders for any loans that were part of the Accelerated Claims Disposition program or the Claims Without Conveyance of Title program. It also didn’t bill them for loans that went into default before the indemnification agreement expired but were not in default on the expiration date.
In all, 486 loans were identified from January 2004 through February 2014 that had enforceable indemnification agreements and losses to HUD but were not billed.
“This condition occurred because HUD’s financial operations center was not able to determine loss amounts for loans that were part of the ACD program, was not aware of the CWCOT program, and considered the final default date for billing only,” the OIG stated. “As a result, HUD did not attempt to recover a loss of $37.1 million for 486 loans that had enforceable indemnification agreements.”
Another 21 streamline refinanced loans had losses or potential losses of nearly $1.4 million.
The OIG is recommending that HUD’s office of finance and budget initiate the billing process for 491 loans that had an enforceable indemnification agreement. It also is calling for the development and implementation of policies and procedures that will rectify the shortcoming.
Tim Rood, chairman of The Collingwood Group LLC, notes that FHA has been expected to hold the line on affordable lending public policy while keeping premiums affordable and avoiding losses. In addition, the agency has lacked the budget to make even modest personnel and technical investments.
“I can’t imagine that Commissioner Galante has appreciated the regular OIG criticism as she manages to keep the organization functioning at a high level on a tethered shoe string budget,” Rood said in a written statement.
Galante received high marks from her predecessors at FHA.
Brian Montgomery, who served as Federal Housing Commissioner during the George W. Bush administration, said in a telephone interview that Galante did “a remarkable job” while serving during challenging times at FHA.
“I think she did a superb job getting FHA back on firm footing and also taking some of the risk management initiatives to a new level,” said Montgomery, who serves on the boards of The Radian Group and Reverse Mortgage Investment Trust Inc. “I think she’ll definitely be missed by the industry.”
Mortgage Bankers Association President and Chief Executive Officer David H. Stevens, who was the first Federal Housing Commissioner under Obama, issued a written statement calling Galante’s departure “a great loss for the industry as well as to HUD.”
“Since assuming her current role as FHA commissioner, she has worked tirelessly on the critical reforms to further strengthen FHA’s risk management that have helped restore the financial health of the MMI fund,” Stevens said in the statement. “Throughout it all, she has been a strong advocate for FHA’s primary role providing safe, affordable, sustainable housing opportunities for all Americans.”
