Julia Gordon made a habit of stopping by Ed Golding’s office when he ran the agency that she now leads.
During her visits, one thing stood out to Golding, who served as the Department of Housing and Urban Development’s principal deputy assistant secretary from 2015 to 2017. Gordon already possessed a vast knowledge of the workings of the Federal Housing Administration, a complex agency within HUD, and the government’s premier mortgage financing product serving first-time homebuyers and borrowers of color.
“I always used to joke with her that she knew more about the program than I did,” Golding said.
President Joe Biden clearly agreed. With her nearly two decades of experience in the housing industry, Gordon secured Biden’s nomination to lead the federal agency. She’ll now return to Golding’s former office — but this time as Federal Housing Commissioner, the face of the FHA.
Mortgage industry stakeholders have described Gordon as “extremely qualified,” “dedicated to addressing affordable housing issues,” and a “pragmatic liberal who will bring people to the table.”
“Julia is very strong willed, and she has strong values,” said Golding. “And while she listens, you’re not going to pull the wool over her eyes.”
Fair housing organizations, including HUD Sec. Marcia Fudge, celebrated her confirmation, which the Senate approved on May 11.
“Julia is a respected leader with decades of experience working to create more vibrant and equitable communities,” Fudge said in a statement. “I am confident that she will bring a depth of expertise and perspective to FHA at a critical time for our country’s housing market.”
Housing industry stakeholders have a lengthy list of changes they hope Gordon will implement.
Perhaps the most common prediction is that Gordon will revise FHA’s servicing handbook to be in sync with the conventional housing market.
Several mortgage trade groups have said if the FHA modernizes servicing guidelines and aligns them more closely to Fannie Mae and Freddie Mac, depository institutions will return to servicing FHA loans.
Brian Chappelle, owner of Potomac Partners, a Washington D.C.-based consultancy that lobbies for lenders, said he personally stressed the importance of this to Gordon when she was a member of the FHFA and HUD transition teams for the Biden administration from Oct. 2020 to Jan. 2021.
“The Obama Administration worked on it, the Trump Administration worked on it, and now the Biden Administration is working on it,” said Chappelle. “Well, I think Julia, because of her knowledge and experience, can do something to bring that to fruition.”
Gordon has professional experience in both the public sector and at nonprofit organizations. According to her LinkedIn profile, she worked at the Center for Responsible Learning from 2007 to 2011, at the Federal Housing Finance Agency from 2011 to 2012 and at the Center for American Progress from 2012 to 2015. Most recently, Gordon was president of the National Community Stabilization Trust, which facilitates the transfer of foreclosed and abandoned properties from financial institutions to local housing organizations for property reuse.
Industry insiders believe her varied experience and background as an attorney make her particularly qualified to address both the long-standing and acute challenges facing the FHA, including outdated servicing requirements.
“Some of my clients have told me that they’ll come back in and service FHA loans if there are reasonable requirements, along the lines of the GSE’s,” Chappelle added.
Meg Burns, former director of single-family program development at the FHA and now, executive vice president at Housing Policy Council, which represents a dozen large banks including Wells Fargo and Chase, said FHA’s servicing guidelines are “a little out of sync with the industry” and need an update.
“They’re inconsistent with the GSEs’ policies and practices and as a result, they are fairly inefficient and can be costly,” Burns said. “There is an operational burden of attempting to comply with the FHA rules, which makes it challenging, and banks have been asking for a number of years now for changes to the policies and practices.”
One prominent annoyance by banks with FHA’s servicing handbook is the stringent requirement for reporting delinquencies.
Servicers must report delinquencies every month and if they forget to report a delinquency, interest on the loan is automatically curtailed for at least a year, said Chappelle.
“If you don’t foreclose on a borrower for another year, [FHA] stops prepaying interest … so the lender loses a whole year of interest just because they missed one notification requirement,” he said. “A lender should be penalized, but if they correct it the next month, they shouldn’t be penalized for a year or two.”
The FHA did not respond to requests for comment.
Many industry stakeholders, including industry veteran Joe Ventrone, believe that Gordon will turn her focus to “closing the minority homeownership gap and racial equity.”
Industry stakeholders have some ideas for how to further that goal, starting with more clarification on some FHA lending programs.
An example of a program offered by the HUD that needs clarification is the department’s down payment assistance program, especially programs that allow government funded down payment assistance. Some Senate Republicans have labeled that type of funding “circular funding schemes.”
Chappelle said that lenders are cautious about risky FHA products because “they’re worried about liability.” Lenders were slammed with settlements stemming from suits brought under the False Claims Act, resulting in some hesitancy to offer riskier products to borrowers.
Former HUD employees and industry stakeholders believe that there is a heightened chance that premiums may be slashed once Gordon is confirmed.
“My sense is that within 30 days [of Gordon’s confirmation], there will be a reduction of the premiums for the sake of helping the bottom end,” said Ventrone, advisor for the National Association of Realtors. “Christ, we should reduce the premiums just to help pay for the gasoline.”
Golding said the administration charges borrowers too much, and that he believes the issue will be looked at in the near future.
“It was intended to be a mutual fund, it wasn’t supposed to be a revenue source for the government, “ said Golding. “The minimum ratio is 2% and it’s way above that, which means that by any measure they’re overcharging.”
But HUD has resisted lowering the up-front and life-of-loan fees. In March 2021, Fudge said that the agency had “no near-term plans” to change FHA’s mortgage insurance premium pricing. Since then, HUD has not adjusted the premiums. Meanwhile, the Mutual Mortgage Insurance Fund has a capital ratio of 8.03% as of September 2021 — almost four times the required statutory minimum.
HUD officials explained in their annual report to Congress that the reason for this had to do with an elevated number of delinquent borrowers in the FHA portfolio and that foreclosures could cause home prices to drop. But delinquencies have moved steadily downwards, fueling predictions that the department will cut premiums.
As of February 2022, 6.48% of FHA loans were seriously delinquent, down from 7.28% in December 2021, according to the FHA’s latest report. And while foreclosures are expected to increase, a large wave is unlikely due to a plethora of options for deferring payments, expanded options to modify loans, and the rapid level of home price appreciation.
Reducing premiums is a measure FHA could take on its own. But the industry also hopes the FHA and other housing agencies will work more closely on policy matters. Ventrone believes that will be one of Gordon’s priorities.
“You can guarantee that there will be coordination between FHFA and FHA because Julia has been at FHFA and knows the impact,” he said.
Specifically, Ventrone said he expects the housing agencies to work together to address topics such as what FHA should do with premiums, FHFA’s risk-based loan pricing, and“hopefully g-fees,” which the GSEs charge to buffer against potential credit losses.
Will Gordon cut mortgage premiums? She has supported reducing them in the past, and at a time when the capital ratio was far below current levels.
Gordon did not respond to a request to comment.
In 2015, Gordon, at the time a senior director at the liberal think tank Center for American Progress, testified before the Subcommittee on Housing and Insurance where she said that a cut in mortgage premiums implemented by the Obama administration would “help [ensure] that FHA continues to be available to the underserved borrowers that most need it.”
Obama’s administration cut the mortgage premiums by more than a third, slashing premiums from 1.35% to .85%, in response to the economy improving, at a time when the capital ratio was 2.07%. Currently premiums continue to hover at .85%, and the capital ratio is 8.03%.
She said during her testimony that this “recalibration” would help to spur a steady supply of first-time homebuyers who could then become move-up homebuyers.
In 2014, Gordon told the Senate Banking Committee that the administration must cut premiums because if the “fees are not set correctly, FHA’s customers, who are more likely to be minority and first-time homebuyers, will be saddled with additional unnecessary expenses, perpetuating an unequal mortgage market.”
She also said that borrowers with student debt and first-generation homebuyers may struggle to put down a 20% down payment on a property and that it should be the administration’s mission to figure out “how to serve the buyers of the future.”
Mike Calhoun, president of CRL, said that Gordon is “very much committed to addressing the affordable housing problem and the racial homeownership gap.”
“It’s important that Julia has worked on this across the spectrum both in urban and rural communities,” he said. She would bring “real rigor” to crafting policy for urban and rural communities, Calhoun said.
During the hearing in 2015, Gordon said that the FHA should focus on improving its program that allows homebuyers to include renovation and repair costs in their mortgage. She said that this would “help hard-hit neighborhoods.”
Gordon also said that the FHA could provide expanded access to the program for nonprofit affordable-housing and community development groups. A few months after this hearing, Gordon transitioned to NCST, a community development program that restores vacant and abandoned properties.
She added that Congress should give the FHA the “authority and latitude to make certain business judgment within the congressionally mandated framework.” FHA, unlike Fannie Mae and Freddie Mac, must operate within the confines of the Congressional appropriations process, rather than funding itself from its book of business.
“Congress should also support FHA’s ability to invest in its infrastructure and quality assurance processes,” she said.
In testimony last year, Gordon gave the mortgage industry a preview of what her priorities might be if she were to head the FHA.
During the testimony, Gordon pointed to her mom’s life, which “has not always been easy,” and her own childhood where she grew up in a single-family rental with low-income parents as pillars that hold up her ideological framework that homeownership is important.
“This lived experience undergirds my commitment to promoting homeownership, which is the best path to family stability and prosperity, and to ensuring that we support safe, affordable, and habitable rental housing,” she said during her testimony.
Gordon said during the hearing that if confirmed, her priority would be to prevent foreclosures stemming from COVID-19 related economic hardships and to increase the supply of affordable housing for both rental and ownership.
“While FHA has already done a lot of hard work to develop the right tools to help these homeowners begin to pay their mortgage again, there is still a very steep hill to climb,” she said in the fall of 2021.
Biden originally nominated Gordon in June 2021, but Gordon and Senate Republicans did not get off on the right foot.
A retweet that Gordon published in 2020 criticizing the police drew a backlash. Gordon has since deleted the tweet, and Gordon has publicly said she did not support defunding the police.
Last year, Senate Republicans from the Senate Banking Committee, specifically Pennsylvania’s Sen. Pat Toomey, asked Gordon to explain the tweet criticizing the police. Republicans on the committee also wrote to Biden demanding the withdrawal of Gordon’s nomination due to the tweets.
The letter specifically pointed out that Gordon retweeted a thread posted by NCST that proclaimed the organizations solidarity with those “who seek to dismantle four hundred years of personal and structural racism.” Senate Republicans argued that these types of statements “call into question [her] fitness to serve in a senior position in the federal government.”
Toomey, in a statement published in May 2022, also criticized Gordon’s career in housing.
“Despite record home and rental prices, Ms. Gordon advocates for throwing more taxpayer money at the housing market,” Toomey said. “It’s government intervention that caused massive inflation in the housing market. The last thing the housing market needs are more demand-side subsidies.”
In October 2021 the committee tied in a vote to advance Gordon’s nomination. Three months later, the committee held the same vote, and ended up with the same result: a tie on whether to push Gordon’s nomination to a full Senate vote. Ultimately, the Senate returned her nomination to Biden in January 2022. The nomination process restarted just days later.
When Gordon’s nomination again fell short of approval from the Senate Banking committee, her nomination went to the full Senate for a vote on whether to allow the nomination to go forward.
Gordon’s nomination remained in limbo until early April when the Senate narrowly advanced her nomination. Vice President Kamala Harris’ vote broke a 50-50 tie, placing Gordon’s nomination on the Senate calendar. On May 11, 2022, the Senate confirmed Gordon as commissioner of the FHA.
Former HUD officials, fair housing advocates and industry observers applauded after the Senate confirmed Gordon, with many noting that the FHA, which oversees $1.2 trillion in single-family forward and reverse mortgages, has been in dire need of a commissioner.
Industry observers have said that the reason for the delay has been purely a political powerplay, with an industry consultant, who requested anonymity, noting that “Gordon unfortunately fell victim to our political times.”
Golding said that Republican lawmakers’ reluctance to support her nomination is not a reflection of Gordon’s qualifications. “It has to do with the times,” Golding said. “This should have been a 100 to zero voice vote — you couldn’t find a person of higher quality.”
Burns, reflecting on the role of the FHA commissioner ahead of Gordon’s confirmation, explained that the head of the administration wears two hats.
“There’s this externally facing function that is so critically important to organizations, but that internal piece of managing a very large bureaucracy is also really important,” Burns said. “She’s got that right level of knowledge and reputational expertise that will really generate some loyalty and support from the ranks, which is really important in a job like that.”