Chances are, as mortgage lenders, you have heard some discussion in recent months about the Federal Housing Administration Commissioner (or lack of one) at the Department of Housing and Urban Development. So, what, exactly, is an FHA Commissioner and why is it so difficult to get someone into that position?
First, a little history lesson on FHA. The FHA was started in 1934 during a drastic downturn in homebuilding and home buying amid the Great Depression. At the time, most mortgages required a 50% down payment, were interest only, and had to be repaid in five to seven years. Obviously, this made homeownership too costly for most non-wealthy families.
Enter the FHA, which insured lenders on 80% of losses on amortizing mortgages with 20-year terms and lower down payments. Not only did FHA make homeownership more affordable and accessible, but it also revolutionized mortgage lending by developing underwriting and product standards that became the norms for the industry. When Congress created FHA, they established the position of Federal Housing Commissioner to head the new agency.
Fast forward approximately 30 years to the creation of HUD in 1965. Established as a cabinet level agency, HUD was to be headed by a Secretary who would be part of the President’s cabinet. Each office within HUD would be led by an Assistant Secretary. These offices include the Office of Housing, Office of Community Planning and Development, Office of Public and Indian Housing, etc.
FHA was placed within the Office of Housing and the head of that office is officially known as the Assistant Secretary for Housing – Federal Housing Commissioner. This individual oversees HUD’s single family, multifamily, healthcare (hospital and nursing care) mortgage insurance programs, as well as rental assistance, housing counseling and manufactured housing programs.
So how does someone become Assistant Secretary for Housing – Federal Housing Commissioner?
An individual must be nominated by the President and have their nomination confirmed by the U.S. Senate. In September of 2017, President Trump nominated Brian Montgomery to be the new FHA Commissioner. Montgomery previously served as FHA Commissioner during the George W. Bush administration and is well known to the housing industry and Washington.
Since his nomination, Montgomery has been awaiting Senate confirmation. His confirmation has been unexpectedly delayed in the Senate as a handful of Senators are using their ability to require 30 hours of debate over his nomination to effectively halt his nomination.
In the midst of a busy legislative period for the Senate, Senate leadership will not permit its limited time to be used to discuss this nomination, as some Democrats are requesting. Therefore, Mr. Montgomery continues to await his confirmation and FHA is being led by interim leadership.
Earlier this year, the Mortgage Bankers Association and 43 other housing organizations sent a letter to Senate leaders urging them to move Mr. Montgomery’s confirmation forward to a vote. It remains to be seen if that effort will be successful, or if FHA will continue to await permanent leadership. Unless and until Montgomery is seated at FHA, it is unlikely that we will see many changes to FHA policy or processes.