Government LendingRegulatory

Behind the executive exodus at Fannie Mae

Restricted salaries loom large, but other factors also contribute to talent drain

Mark Calabria & Hugh Frater
FHFA Director Mark Calabria and Fannie Mae CEO Hugh Frater (left to right)

High-level departures from Fannie Mae show no signs of abating.

Celeste Mellet Brown, Fannie Mae’s chief financial officer, is the latest executive to depart the government sponsored entity. Brown’s 2020 compensation, despite a strict salary cap imposed by the Federal Housing Finance Agency, was $2.3 million, making her the third-highest paid employee at the company.

Some observers believe the string of executive walkouts is the result of a simple calculus: an experienced, talented executive can make far more money elsewhere.

That’s certainly true in Mellet Brown’s case. At Evercore, where she will assume the role of chief financial officer by the end of the year, she will earn twice what she made at Fannie Mae. In addition to a $500,000 base salary and $3.75 million annual incentive bonus, Brown will receive $2.6 million in stocks over the next four years, according to a filing with the Securities and Exchange Commission. Her employment agreement even offers to make up for deferred compensation from Fannie Mae if it exceeds $600,000.

Few could resist such a pay hike. (“They have families,” one former employee told HousingWire.)

Fannie Mae is keenly aware of the risk of executive attrition due to its sub-par compensation levels. The limits, which cap base salaries at $600,000, place it “at a disadvantage compared to many other companies in attracting and retaining executives,” the company told investors in its most recent annual report.

The filing goes on to note that if there were “several high-level departures at approximately the same time,” its ability to conduct business could be adversely affected. Several of the executives who recently left had spent decades at Fannie Mae.  

A spokesperson for the company said that such changes are a natural part of corporate life and Fannie Mae is no exception. The spokesperson added that in addition to the strong executive leadership team at Fannie Mae, there is a strong bench to support them.


Besides the compensation limits — which cap base salary at $600,000 — executives may be looking for the exits simply to escape working under conservatorship.

The structure gives the FHFA the power of management, boards and shareholders at the two enterprises. It’s a rub for executives who don’t typically relish being subject to such strict oversight controls.

Former employees who spoke to HousingWire describe a stifling environment, which they attributed to FHFA’s conservatorship, and a bureaucratic regime that is anti-innovation. It’s not just employee pension plans that were axed when the government seized the enterprises: FHFA clamped down on conferences and travel to meet customers, former executives said.

Then there’s the attitude toward Fannie Mae’s customers, which some perceive as overly dismissive. In March, new limits on the amount of investment property mortgages the GSEs are permitted to buy sparked an industry backlash.

Bharat Ramamurti, deputy director of the National Economic Council, acknowledged that there were “issues” with the policy, and said he would speak to the FHFA.

A spokesperson for the regulator said that the focus of the enterprises, according to the role they have been given by the federal government, is to provide liquidity in the marketplace and let the private industry innovate and compete.

“The Enterprises continue to attract the most experienced mortgage executives in the industry and their attrition rate for all employees is low,” a spokesperson for the FHFA said. “In other respects, the data speaks for itself, record profits, more capital than they’ve had since they failed and were bailed out by the government, and both are frequently listed among the best places to work.”

Over the past year, the likelihood of returning the GSEs to the private market has dimmed significantly. While leaving conservatorship was a key priority of the Trump administration, it does not appear to be one for the Biden administration. FHFA Director Mark Calabria‘s tenure could be short under the Biden administration. If a pending Supreme Court decision finds the structure of the regulator unconstitutional, it would allow Biden to fire Calabria, who was the former chief economist for Vice President Mike Pence. Biden is widely expected to do so, which further diminishes the already slim possibility of leaving conservatorship.

That’s a problem for high-level execs who want free rein, said Tim Rood, a former Fannie Mae executive who is now head of industry relations at SitusAMC.

“Smart and dynamic executives want the freedom and latitude to do smart and dynamic things at their discretion,” Rood said. “If you put operational and policy restrictions on these executives – as FHFA has certainly done – then morale at the top suffers and that trickles down to their subordinates.”


Though Hugh Frater remains as CEO, the high-level executives who have left in recent months amount to nearly 150 years of experience — a significant loss of institutional knowledge at Fannie Mae, the larger of the two GSEs.

Many of the departures have been in the single-family business. Former employees say the bench is becoming thin. Andrew Bon Salle, one of Fannie Mae’s most senior leaders and its head of single-family, left at the end of 2020. The parent company of wholesale lender Homepoint named Bon Salle chairman of the board in January. He also serves on the board of Sagent, a mortgage fintech firm. Fannie Mae named Malloy Evans, previously the company’s chief credit officer for single family, to head the division.

Two other Fannie Mae executives followed Bon Salle to Homepoint.

John Forlines, most recently Fannie Mae’s chief risk officer, joined Homepoint as its chief risk officer in March. His career at Fannie Mae spanned 34 years.

Noelle Lipscomb, Fannie Mae’s internal audit vice president, spent 17 years at the enterprise before joining Homepoint in April as its chief audit executive.

Nearly all of the recently departed executives have been quickly scooped up by financial services, fintech and mortgage firms.

Henry Cason, who spent more than 27 years at Fannie Mae and was most recently the head of digital products, departed in January to become CEO of St. Louis-based personal finance startup FinLocker.

Renee Schultz, Fannie Mae’s senior vice president of capital markets, left Fannie Mae in April after 22 years at the firm. She now serves on the board of directors for her alma mater, St. Mary’s College, and PennyMac Mortgage Investment Trust appointed Schultz to its board of trustees in May. Devang Doshi with AGNC Investment Corp will assume the role of senior vice president of capital markets, according to those familiar with the matter.

Desmond Smith, who was chief customer officer in Fannie Mae’s single-family business, left in February. In March, United Wholesale Mortgage hired him as its chief growth officer.

Andrew Peters, Fannie Mae’s head of single-family strategy and insights, left in April to be president of mortgage banking consulting firm LenderWorks.

Jeffrey Walker, most recently Fannie Mae’s single-family chief strategy officer, departed in October 2020. Walker is now on the board at Get Credit Healthy, Inc., a credit remediation company.

And Fernando Correa Arango, most recently its head of corporate strategy, left in January after two years at Fannie Mae.

What kept them there so long in the first place?

According to Fannie Mae employees who have left in recent years, working at the GSE was a well-paying, interesting job. Those working in single-family, in particular, described the work as exciting and rewarding. Even under conservatorship, many stayed because they felt they could have a positive impact on the health and efficiency of the housing market.

Others may have been motivated by wanting to finish long-term projects, such as the development of a platform that allows the GSEs to issue a single mortgage-backed security.

Common Securitization Solutions, a joint venture owned by Freddie Mac and Fannie Mae, facilitates issuance of the Uniform Mortgage-Backed Security, releases ongoing disclosures and administers the securities after they’ve been issued.

“The common securitization platform was a high-risk transition,” said Jaret Seiberg, the financial services and housing policy analyst for Cowen Washington Research Group. “A lot of people were very vested in wanting to see that succeed.”

Staying on to complete such a project would also give anyone who was involved the added benefit of understanding the new venture from the inside at a new employer.

“The professional bonus is that CSS was a brand new and growing private enterprise with great promise as initially envisioned,” said Rood.

It also gave the engineers and executives that developed the technology a “solid landing zone,” Rood said, after they left Fannie Mae and Freddie Mac, although he added there was nothing untoward about that.

The carrot

For years, high-level GSE employees have been awaiting the end to conservatorship.

In February 2020, FHFA hired investment bank Houlihan Lokey Capital to create a “roadmap” toward a possible IPO, including business and capital structures, market impacts and timing, and available capital-raising alternatives.

That was then. Fifteen months, a pandemic and a new presidential administration later, a White House budget document suggests there is little desire to end the current arrangement.

“Fannie Mae and Freddie Mac are in their twelfth year of conservatorship, and Congress has not yet enacted legislation to define the GSEs’ long-term role in the housing finance system,” the document reads. “The Administration is committed to housing finance policy that expands fair and equitable access to homeownership and affordable rental opportunities, protects taxpayers, and promotes financial stability.”

Housing finance experts agree there is little reason for the government to end what is an extremely lucrative arrangement. Through the end of 2020, the GSEs have paid $301 billion in dividend payments to the Treasury.

During his tenure, Calabria has stressed his desire for the enterprises to hold higher liquidity levels as a buffer against a market downturn. In 2019, the Treasury began allowing the government-sponsored enterprises to retain a combined $45 billion in capital, $25 billion for Fannie Mae and $20 billion for Freddie Mac. By the end of 2020, Fannie Mae’s net worth had swelled to $25.3 billion, up from $6.2 billion at the end of 2018. In January, the FHFA and Treasury reached an agreement to allow the GSEs to retain much more of their earnings.

Under conservatorship, the GSEs are certainly a moneymaker for the Treasury, but they also allow the federal government to effectively control the housing market. Former Fannie Mae employees attest that the federal government is unlikely to give up the influence it wields through the FHFA.

“The problem with conservatorship is that it works too well,” said Seiberg. “It works so well that no one is willing to take the risk to try something else.”

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