FHFA Prepared Remarks of Melvin Watt

On November 7, the Federal Housing Finance Agency (FHFA) released the prepared remarks of Melvin L. Watt at the 2014 National Association of Realtors Conference & Expo.

Prepared Remarks of Melvin L. Watt, Director, FHFA, at the 2014 National Association of Realtors Conference & Expo

Remarks as Prepared for Delivery
Melvin L. Watt, Director
Federal Housing Finance Agency
2014 National Association of Realtors Conference & Expo
New Orleans, LA

Thank you for inviting me to speak to you this morning.  As realtors, you are working on the ground every day to help individuals and families who want to achieve the goal of homeownership.  While we know that homeownership is not a good option for everyone, we also know that it is one of the primary ways that many Americans have accumulated and grown personal wealth.  Homeownership is also a means for many families to gain stability and invest in their communities. 

The last several years have been difficult ones for the housing market, especially when it comes to homeownership.  In the aftermath of the financial crisis, the market was hit hard with record defaults, loss of home value and equity, and foreclosures.  This market turmoil has affected your communities and your work as realtors.  But, things have started to improve.

At this time when the housing market is recovering but not yet fully recovered, there has been much needed conversation about homeownership, both about access to homeownership and about demand for homeownership. 

On the access to homeownership side, the conversations always start with the availability of and access to credit.  There is widespread concern that today’s credit market has swung from the reckless lending of the past to an opposite extreme in which only borrowers who have the most pristine credit can get a mortgage.  Compared to the pre-crisis period in the early 2000s, the overall volume for purchase mortgage lending has significantly declined.  In addition, credit scores required by lenders have, on average, risen considerably both across the entire market and within Fannie Mae and Freddie Mac’s guarantee business.  

FHFA, both as regulator of the Federal Home Loan Banks and as regulator and conservator of Fannie Mae and Freddie Mac, is at the heart of this conversation.  No one wants to return to the excesses and abuses of the past and FHFA is taking steps to ensure that this does not occur.  But the message we have tried to send is that we need to find a way back to responsible lending to creditworthy borrowers across all market segments.      

As part of FHFA’s statutory obligations (1) to ensure safety and soundness of our regulated entities and (2) to ensure liquidity in the housing finance market, the question of how to achieve responsible access to credit is of critical importance.  In putting the access to credit conversation in context, we should start with the mortgage lending reforms that have been adopted since the housing crisis began. 

We now have in place a robust set of mortgage lending protections that could well have prevented the abusive lending boom we experienced.  With the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, borrowers now have meaningful protections against the kind of mortgages with risky features that resulted in high default rates and helped fuel the crisis. 

With these reforms, before a mortgage loan can be made, lenders are now required to assess whether a borrower has the ability to repay a mortgage.  This requirement provides a critical protection for borrowers, contributes to the stability of the housing market, and is fundamental to safe and sound lending.  Assessing a borrower’s ability to repay prevents the no-doc lending that was pervasive during the boom and led to widespread losses. 

Reforms that have been adopted also restrict other mortgage products, such as subprime teaser adjustable rate mortgages that led to unaffordable payments when interest rates increased a few years into the loan.  Other reforms restrict the prepayment penalties that stripped away home equity when borrowers tried to exit unaffordable loan products.  And, mortgage originators can no longer be paid more for putting borrowers who qualify for better loan alternatives into more expensive loans.

The Dodd-Frank Act also created the Qualified Mortgage standard.  This standard requires loans to be fully amortizing, meaning no interest only or negatively amortizing loans.  To be a Qualified Mortgage, points and fees cannot exceed the specified thresholds and loan terms also cannot exceed 30 years.  And FHFA has directed the Enterprises to limit their mortgage purchases to loans that meet these Qualified Mortgage product feature requirements. 

These reforms establish a solid new foundation for the housing market to responsibly provide access to credit for creditworthy borrowers. 

However, today’s constrained credit environment has resulted in relatively few borrowers buying houses and benefitting from these protections and improvements.  The recent lender practice of setting higher minimum credit score standards than required by the Enterprises has locked many creditworthy borrowers out of today’s market.  This practice has been driven both by an overall cautious approach to the post-financial crisis housing market and by uncertainty about Fannie Mae and Freddie Mac’s repurchase requirements.  As a result of these and other factors, mortgage originators have focused on refinancing and lending to borrowers with higher credit scores in recent years. 

But there are also a number of troubling headwinds limiting demand for homeownership.  These demand factors are keeping some individuals and families on the sidelines of the market instead of looking to buy a home.  So, factors driving down demand must be an important part of the conversation also.  What are some of these factors?

Increasingly, millennials – which include young people between 25 and 34 years of age – are choosing to remain renters.  Signs suggest that many millennials want to own a home in the future, but are holding off on purchasing for a number of reasons.  Many are getting married and having children later in life than their parents did, which often delays a decision to become a first-time homebuyer.  Additionally, many of them continue to face economic hardships from having entered the job market during the Great Recession.  The number of adult children living with their parents has also risen dramatically. 

Student loan debt is also having a financial impact on some millennials, and there are many nuances to this issue.  On the one hand, higher education may lead to increased future income for many in this group and, therefore, ultimately increase their ability to become successful homeowners.  However, many individuals with student loans are struggling with high debt levels and impaired ability to save for a down payment – both of which make it more difficult to qualify for a mortgage.        

On the demand side also, prospective borrowers other than young people and millennials are also facing challenges in accumulating enough money to make a large down payment and cover closing costs.  This is a problem of particular importance to communities of color, which generally have significantly lower average household wealth and experienced record loss of wealth during the financial crisis as a result of abusive mortgage products, the economic downturn and other factors.  And the impact of this wealth disparity is likely to have a growing impact on the future housing market since people of color are projected to account for approximately 70 percent of the increase in number of households over the next decade. 

Demand in today’s market is also limited by former homeowners who found themselves unable to keep up with their mortgage payments during the financial crisis, including many who lost their jobs during the recession or faced reductions in their income.  Many of these individuals not only lost their homes, but also seriously damaged their credit.  Many filed for bankruptcy.  Although some of them may be back on their feet in terms of income, their impaired credit records constrain their ability to return to homeownership.  

A less quantifiable factor on demand is the psychological impact of the housing crisis across the country.  Many people watched their friends or loved ones lose their homes or suffer financial hardship in the housing crisis, and this has deterred them from entering the homeownership market.  

Bottom line, there is no lack of rational explanations for why demand for homeownership is down, and these explanations will continue to change and evolve in the months and years ahead.  While things will not change overnight, it is my hope that many creditworthy individuals and families who are currently renters – but have the ability to pay a mortgage and become homeowners – will have the opportunity to pursue homeownership and will decide to do so.

A shift in this direction will not only be beneficial for our economy and overall housing market, but homeownership and paying down a mortgage remains a way that many individuals and families can save and build and retain wealth over time.1   The reforms I’ve already discussed will restrict the kind of wealth-stripping and abusive lending practices that characterized the subprime boom.  And, the foundation of these reforms and responsible lending practices will provide predictable mortgages that borrowers can afford and have the ability to repay.  Because of these factors, the fact that home prices are still low in many locations, and the fact that interest rates are low, now is a great time for realtors to be actively encouraging their customers who can afford it to become homeowners.

While FHFA can’t respond to every factor that is restricting demand for homeownership, we do have a number of efforts underway to encourage responsible lending and access to credit for those who want to become homeowners.  All of these efforts are consistent with our mandate to ensure the safety and soundness of our regulated entities and to ensure liquidity in the national housing finance market.  These efforts are also consistent with the actions we are continuing to take to strengthen the financial position of Fannie Mae and Freddie Mac while they are in conservatorship, such as addressing guarantee fees, requiring the Enterprises to transfer significant credit risk to the private market, reducing their portfolio investments, and improving their servicing standards and loss mitigation options.      

As I discussed two weeks ago when I spoke to the Mortgage Bankers, FHFA is continuing the process of updating and clarifying the Representation and Warranty Framework (Framework) for the Enterprises.  While I won’t take the time today to repeat the details of this Framework, I do want to emphasize that FHFA is working to have the Enterprises place increased attention and resources on conducting quality control reviews and providing lenders access to automated appraisal tools to detect problems with mortgage purchases early on, even before the loan is purchased.  In addition, we believe that these revisions and clarifications to the Framework will reduce lender uncertainty about when the Enterprises will require repurchase of a loan and, as a result, will pave the way for lenders to lift some of their current credit overlays and reduce the cost of credit to borrowers without compromising the safety and soundness of the Enterprises.  

I also announced recently that the Enterprises are working to develop sensible and responsible guidelines for mortgages with loan-to-value ratios between 95 and 97 percent.  As I said earlier, there are creditworthy borrowers in today’s market who have the income to afford monthly mortgage payments but do not have the money to make a large down payment and pay closing costs.  Purchase guidelines that allow for 3 percent down payments will provide an opportunity for access to credit for some of these borrowers.  

To appropriately manage the Enterprises’ risk, the guidelines for these loans will be targeted in their scope and will include standards that support safety and soundness.  We know that the size of a down payment – by itself – is not the most reliable indicator of whether a borrower will repay a loan.  As a result, the guidelines will require that borrowers have “compensating factors” and risk mitigants – such as housing counseling, stronger credit histories, or lower debt-to-income ratios – in order to make the mortgage eligible for purchase by Fannie Mae or Freddie Mac.  This approach builds on the Enterprises’ experience using compensating factors and risk mitigants.  It also meets the objective to develop guidelines that look at and assess a borrower’s full financial picture and ability to repay, not just whether they have enough money for a big down payment.  Additionally, like other loans with down payments below 20 percent, these loans will require credit enhancement, such as private mortgage insurance. 

For individuals and families who rent rather than buy, continuing to support affordable rental housing is also an ongoing priority for FHFA and the Enterprises.  Fannie Mae and Freddie Mac have historically played a key role in providing financing to multifamily projects and their multifamily business has demonstrated excellent performance even through the recent financial crisis. 

Under FHFA’s 2014 Conservatorship Strategic Plan, FHFA did not require a reduction in the Enterprises’ multifamily production levels, and we provided additional capacity for the Enterprises to participate in affordable multifamily projects.  Consistent with safety and soundness, FHFA is working with the Enterprises on multifamily initiatives for smaller rental properties and for manufactured housing communities which often are more likely to benefit smaller or more rural communities.  Additionally, the Federal Home Loan Banks continue to support affordable rental housing, including units affordable to very low-income families, through their Affordable Housing Program and other initiatives. 

Thank you again for providing me with the opportunity to be with you today and to speak about our work at FHFA to improve access to mortgage financing in a safe and sound way.  Our efforts at FHFA build upon the foundation of mortgage lending reforms that now provide borrowers with significant protections from the abusive practices that contributed to the financial crisis.  In fact, as the housing market continues to recover, we all have a shared responsibility to ensure that the home purchase process provides borrowers with opportunities for homeownership that are sustainable.

As FHFA continues efforts to move the housing finance market back to a state of normalcy that is built on responsible lending, we look forward to our ongoing engagement with realtors and other stakeholders in this important endeavor.

 1 See e.g., Herbert, McCue, and Sanchez-Moyano, “Is Homeownership Still an Effective Means of Building Wealth for Low-income and Minority Households? (Was it Ever?),” Joint Center for Housing Studies, Harvard University, at 48 (September 2013) (available at http://www.jchs.harvard.edu/sites/jchs.harvard.edu/files/hbtl-06.pdf).

Stefanie Johnson (202) 649-3030? / Corinne Russell (202) 649-3032

Please click here to view the prepared remarks online.

About Safeguard 
Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders, and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally.
Website: www.safeguardproperties.com.



Alan Jaffa

Alan Jaffa is the chief executive officer for Safeguard, steering the company as the mortgage field services industry leader. He also serves on the board of advisors for SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Alan joined Safeguard in 1995, learning the business from the ground up. He was promoted to chief operating officer in 2002, and was named CEO in May 2010. His hands-on experience has given him unique insights as a leader to innovate, improve and strengthen Safeguard’s processes to assure that the company adheres to the highest standards of quality and customer service.

Under Alan’s leadership, Safeguard has grown significantly with strategies that have included new and expanded services, technology investments that deliver higher quality and greater efficiency to clients, and strategic acquisitions. He takes a team approach to process improvement, involving staff at all levels of the organization to address issues, brainstorm solutions, and identify new and better ways to serve clients.

In 2008, Alan was recognized by Crain’s Cleveland Business in its annual “40-Under-40” profile of young leaders. He also was named a NEO Ernst & Young Entrepreneur of the Year® finalist in 2013.


Chief Operating Officer

Michael Greenbaum

Michael Greenbaum is the chief operating officer for Safeguard. Mike has been instrumental in aligning operations to become more efficient, effective, and compliant with our ever-changing industry requirements. Mike has a proven track record of excellence, partnership and collaboration at Safeguard. Under Mike’s leadership, all operational departments of Safeguard have reviewed, updated and enhanced their business processes to maximize efficiency and improve quality control.

Mike joined Safeguard in July 2010 as vice president of REO and has continued to take on additional duties and responsibilities within the organization, including the role of vice president of operations in 2013 and then COO in 2015.

Mike built his business career in supply-chain management, operations, finance and marketing. He has held senior management and executive positions with Erico, a manufacturing company in Solon, Ohio; Accel, Inc., a packaging company in Lewis Center, Ohio; and McMaster-Carr, an industrial supply company in Aurora, Ohio.

Before entering the business world, Mike served in the U.S. Army, Ordinance Branch, and specialized in supply chain management. He is a distinguished graduate of West Point (U.S. Military Academy), where he majored in quantitative economics.



Sean Reddington

Sean Reddington is the new Chief Information Officer for Safeguard Properties LLC. Sean has over 15+ years of experience in Information Services Management with a strong focus on Product and Application Management. Sean is responsible for Safeguard’s technological direction, including planning, implementation and maintaining all operational systems

Sean has a proven record of accomplishment for increasing operational efficiencies, improving customer service levels, and implementing and maintaining IT initiatives to support successful business processes.  He has provided the vision and dedicated leadership for key technologies for Fortune 100 companies, and nationally recognized consulting firms including enterprise system architecture, security, desktop and database management systems. Sean possesses strong functional and system knowledge of information security, systems and software, contracts management, budgeting, human resources and legal and related regulatory compliance.

Sean joined Safeguard Properties LLC from RenPSG Inc. which is a nationally leading Philintropic Software Platform in the Fintech space. He oversaw the organization’s technological direction including planning, implementing and maintaining the best practices that align with all corporate functions. He also provided day-to-day technology operations, enterprise security, information risk and vulnerability management, audit and compliance, security awareness and training.

Prior to RenPSG, Sean worked for DMI Consulting as a Client Success Director where he guided the delivery in a multibillion-dollar Fortune 500 enterprise client account. He was responsible for all project deliveries in terms of quality, budget and timeliness and led the team to coordinate development and definition of project scope and limitations. Sean also worked for KPMG Consulting in their Microsoft Practice and Technicolor’s Ebusiness Division where he had responsibility for application development, maintenance, and support.

Sean is a graduate of Rutgers University with a Bachelor of Arts and received his Masters in International Business from Central Michigan University. He was also a commissioned officer in the United States Air Force prior to his career in the business world.


General Counsel and Executive Vice President

Linda Erkkila, Esq.

Linda Erkkila is the general counsel and executive vice president for Safeguard and oversees the legal, human resources, training, and compliance departments. Linda’s responsibilities cover regulatory issues that impact Safeguard’s operations, risk mitigation, enterprise strategic planning, human resources and training initiatives, compliance, litigation and claims management, and mergers, acquisition and joint ventures.

Linda assures that Safeguard’s strategic initiatives align with its resources, leverage opportunities across the company, and contemplate compliance mandates. Her practice spans over 20 years, and Linda’s experience covers regulatory disclosure, corporate governance compliance, risk assessment, executive compensation, litigation management, and merger and acquisition activity. Her experience at a former Fortune 500 financial institution during the subprime crisis helped develop Linda’s pro-active approach to change management during periods of heightened regulatory scrutiny.

Linda previously served as vice president and attorney for National City Corporation, as securities and corporate governance counsel for Agilysys Inc., and as an associate at Thompson Hine LLP. She earned her JD at Cleveland-Marshall College of Law. Linda holds a degree in economics from Miami University and an MBA. In 2017, Linda was named as both a “Woman of Influence” by HousingWire and as a “Leading Lady” by MReport.


Chief Financial Officer

Joe Iafigliola

Joe Iafigliola is the Chief Financial Officer for Safeguard. Joe is responsible for the Control, Quality Assurance, Business Development, Accounting & Information Security departments, and is a Managing Director of SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Joe has been in a wide variety of roles in finance, supply chain management, information systems development, and sales and marketing. His career includes senior positions with McMaster-Carr Supply Company, Newell/Rubbermaid, and Procter and Gamble.

Joe has an MBA from The Weatherhead School of Management at Case Western Reserve University, is a Certified Management Accountant (CMA), and holds a bachelor’s degree from The Ohio State University’s Honors Accounting program.


AVP, High Risk and Investor Compliance

Steve Meyer

Steve Meyer is the assistant vice president of high risk and investor compliance for Safeguard. In this role, Steve is responsible for managing our clients’ conveyance processes, Safeguard’s investor compliance team and developing our working relationships with cities and municipalities around the country. He also works directly with our clients in our many outreach efforts and he represents Safeguard at a number of industry conferences each year.

Steve joined Safeguard in 1998 as manager over the hazard claims team. He was instrumental in the development and creation of policies, procedures and operating protocol. Under Steve’s leadership, the department became one of the largest within Safeguard. In 2002, he assumed responsibility for the newly-formed high risk department, once again building its success. Steve was promoted to director over these two areas in 2007, and he was promoted to assistant vice president in 2012.

Prior to joining Safeguard, Steve spent 10 years within the insurance industry, holding a number of positions including multi-line property adjuster, branch claims supervisor, and multi-line and subrogation/litigation supervisor. Steve is a graduate of Grove City College.


AVP, Operations

Jennifer Jozity

Jennifer Jozity is the assistant vice president of operations, overseeing inspections, REO and property preservation for Safeguard. Jen ensures quality work is performed in the field and internally, to meet and exceed our clients’ expectations. Jen has demonstrated the ability to deliver consistent results in order audit and order management.  She will build upon these strengths in order to deliver this level of excellence in both REO and property preservation operations.

Jen joined Safeguard in 1997 and was promoted to director of inspections operations in 2009 and assistant vice president of inspections operations in 2012.

She graduated from Cleveland State University with a degree in business.


AVP, Finance

Jennifer Anspach

Jennifer Anspach is the assistant vice president of finance for Safeguard. She is responsible for the company’s national workforce of approximately 1,000 employees. She manages recruitment strategies, employee relations, training, personnel policies, retention, payroll and benefits programs. Additionally, Jennifer has oversight of the accounts receivable and loss functions formerly within the accounting department.

Jennifer joined the company in April 2009 as a manager of accounting and finance and a year later was promoted to director. She was named AVP of human capital in 2014. Prior to joining Safeguard, she held several management positions at OfficeMax and InkStop in both operations and finance.

Jennifer is a graduate of Youngstown State University. She was named a Crain’s Cleveland Business Archer Award finalist for HR Executive of the Year in 2017.


AVP, Application Architecture

Rick Moran

Rick Moran is the assistant vice president of application architecture for Safeguard. Rick is responsible for evolving the Safeguard IT systems. He leads the design of Safeguard’s enterprise application architecture. This includes Safeguard’s real-time integration with other systems, vendors and clients; the future upgrade roadmap for systems; and standards designed to meet availability, security, performance and goals.

Rick has been with Safeguard since 2011. During that time, he has led the system upgrades necessary to support Safeguard’s growth. In addition, Rick’s team has designed and implemented several innovative systems.

Prior to joining Safeguard, Rick was director of enterprise architecture at Revol Wireless, a privately held CDMA Wireless provider in Ohio and Indiana, and operated his own consulting firm providing services to the manufacturing, telecommunications, and energy sectors.


AVP, Technology Infrastructure and Cloud Services

Steve Machovina

Steve Machovina is the assistant vice president of technology infrastructure and cloud services for Safeguard. He is responsible for the overall management and design of Safeguard’s hybrid cloud infrastructure. He manages all technology engineering staff who support data centers, telecommunications, network, servers, storage, service monitoring, and disaster recovery.

Steve joined Safeguard in November 2013 as director of information technology operations.

Prior to joining Safeguard, Steve was vice president of information technology at Revol Wireless, a privately held wireless provider in Ohio and Indiana. He also held management positions with Northcoast PCS and Corecomm Communications, and spent nine years as a Coast Guard officer and pilot.

Steve holds a BBA in management information systems from Kent State University in Ohio and an MBA from Wayne State University in Michigan.


Assistant Vice president of Application Development

Steve Goberish

Steve Goberish, is the assistant vice president of application development for Safeguard. He is responsible for the maintenance and evolution of Safeguard’s vendor systems ensuring high-availability, security and scalability while advancing the vendor products’ capabilities and enhancing the vendor experience.

Prior to joining Safeguard, Steve was a senior technical architect and development manager at First American Title Insurance, a publicly held title insurance provider based in southern California, in addition to managing and developing applications in multiple sectors from insurance to VOIP.

Steve has a bachelor’s degree from Kent State University in Ohio.