Mortgage Daily

Published On: March 23, 2009
Former Option ARM Exec May Head FHADavid Stephens previously worked at World Savings

March 23, 2009

By MortgageDaily.com staff

An executive rumored to be President Barack Obama’s pick to head the Federal Housing Administration was previously an executive at an institution that pumped out billions-of-dollars in pick-a-payment adjustable-rate mortgages.David H. Stevens is being vetted by the Obama administration for the top job at the agency, the Washington Post reported today — citing anonymous sources.

A spokesman for the U.S. Department of Housing and Urban Development had no comment.

Stevens was named president and chief executive officer of Long & Foster Companies in October 2008, according to a press release from the Chantilly, Va.-based real estate company. He was 51 at the time. Stevens originally joined the company in July 2006.

photo of David Stevens
Long & Foster photo of David Stevens

Among the holdings of Long & Foster, which claims to be the biggest privately-owned real estate firm in the country, is Prosperity Mortgage Co.Stevens — who graduated from the University of Colorado at Boulder — was previously was “national wholesale manager responsible for all sales, operations, and finance at Wells Fargo Home Mortgage,” Long & Foster said in its October 2008 announcement. He also worked at Freddie Mac, where he managed all activities related to sales, market share, customer management and business strategy.

But the potential nominee, who will need to be confirmed by the U.S. Senate, will probably face the most resistance over his 16 years at World Savings. He left the formerly Oakland-based institution as national sales manager over the mortgage division.

World was a big originator of option-ARM mortgages in California — where borrowers sought exotic loan programs that would enable them to initially afford high home prices.

Originators and account executives at World received extensive training on how to sell option-ARMs. Some of World’s products included rates that jumped after just one month, while many included negative amortization. The option-ARM mentality was so entrenched at World that salespeople almost seemed to be part of a cult.

World-parent Golden West Financial was acquired by Wachovia Corp. in October 2006 — just before the mortgage market headed into a tailspin. Former Wachovia chairman and CEO Ken Thompson seized on World’s option-ARM business and attempted to expand it throughout the entire Wachovia organization.

But the Charlotte, N.C.-based bank began to suffer big losses as its investment in Golden West started to sour — ultimately leading to the ouster of Thompson in June 2008. Wachovia, which nearly failed, was acquired itself by Wells Fargo & Co. on Dec. 31, 2008.

Stevens would have his hands full running FHA.

As conforming guidelines have tightened and financial institutions and mortgage lenders have lost access to many conventional programs, FHA activity has soared. The number of loans originated nearly tripled from 524,736 in 2007 to 1,389,020 last year. At the same time, FHA delinquency of at least 30 days has gone from 12.15 percent in the first-quarter 2007 to 13.73 percent in the fourth-quarter 2008.

Whoever ends up being confirmed as the FHA commissioner will work under Shaun Donovan, who was himself confirmed at HUD secretary on Jan. 22.


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