FHFA Prepared Remarks of Melvin Watt

Investor Update
October 19, 2015

Mortgage Bankers Association’s Annual Convention and Expo 2015

Thank you for that introduction and for inviting me back to your annual convention again this year.  It’s a pleasure to be here with Secretary Castro and Director Cordray.

At the Federal Housing Finance Agency (FHFA), we place a high priority on engaging with a broad cross section of stakeholders, including the Mortgage Bankers Association and its members, about the Federal Home Loan Banks (FHLBanks) and about Fannie Mae and Freddie Mac (the Enterprises).  This dialogue has been especially important as FHFA continues to manage and oversee the Enterprises, which are now into their eighth year of conservatorship.  I hope all of you share our view that this dialogue is mutually beneficial. 

To further our ongoing conversation, I’d like to update you today about some of the things we’ve been doing since I spoke to you last year and give you an idea of where we expect to head on some key initiatives in 2016.  I believe you will find that these comments underscore our commitment to continue to innovate as we strive to accomplish our statutory mandates to, among other things, foster liquidity and efficiency in the housing finance markets and to do so in a safe and sound manner.  

Common Securitization Platform and Single Security

Let me begin with our work to build the CSP and develop the Single Security.  These are both big multiyear initiatives that will change the way the Enterprises issue securities and make the housing finance market more efficient.  These initiatives may also change how private companies issue securities in the future, since we have committed to using technology that will make the CSP adaptable for use by other secondary market participants. 

During the course of this year, we have worked to build and test an increasing amount of the operations and architecture of the CSP.  At the center of this work is Common Securitization Solutions (CSS), LLC, which is the Fannie Mae and Freddie Mac joint venture that is now responsible for developing and running the CSP.  In 2015, CSS released updated software to the Enterprises to further their testing processes.  In addition, an Industry Advisory Group of stakeholders has started having formal meetings with the Enterprises and CSS.  We believe that this is an invaluable forum for feedback and discussion about the CSP and Single Security.

During 2015, we have also worked to define the parameters of the new Single Security.  The progress report we issued earlier this year provides important details about how the Single Security will look and operate.  I encourage each of you to read this report if you have not already done so and to continue to provide your input as we work aggressively to move this initiative across the finish line.   

We recently announced that the CSP and Single Security efforts will be launched in two stages.  In the first stage, which we are calling Release 1, the CSP will begin issuing and administering only Freddie Mac’s securities.  In the second phase, Release 2, the CSP will begin issuing and administering securities for both Enterprises and will do so using the new Single Security for the first time. 

We realize that there is a degree of impatience and a desire to see all these efforts completed right away.  While I’m not in a position to give you specific dates right now, I can confirm that we plan to announce the Release 1 timeline in 2016.  We also hope to be able to announce the Release 2 timeline next year.  When we do announce the Release 2 timeline, rest assured that we will meet our commitment to provide at least one year of advance notice before any go live date. 

Meeting both of these objectives will require continued testing and sustained progress of the kind we have had to date.  It will also require much more dialogue between CSS, the Enterprises, FHFA and multiple other stakeholders.  We share your sense of urgency, and I assure you that we are moving expeditiously, but responsibly, to launch the CSP and the Single Security.

Credit Risk Transfer Transactions

Another long-term priority for FHFA is our work with the Enterprises to transfer credit risk to the private sector through various financial transactions.  This initiative ensures that the private sector continues to assume meaningful credit risk, with the Enterprises remaining as backstops to cover catastrophic risk.  Since 2013, the Enterprises have transferred a significant portion of credit risk on single-family mortgages with a total unpaid principal balance exceeding $700 billion.  Both Fannie Mae and Freddie Mac are on track to exceed our 2015 Conservatorship Scorecard credit risk transfer objectives by comfortable margins. 

As the Enterprises have gotten these risk transfer transactions up and running, we have been strategic about which loans to target.  Instead of using a random sample of Enterprise loans, we have targeted new loan purchases with the greatest credit risk.  The targeted loans include new acquisitions of 30-year fixed-rate mortgages that have loan-to-value (LTV) ratios exceeding 60 percent, excluding HARP refinances.  The Enterprises are currently transferring significant credit risk on approximately 90 percent of these targeted loans, the bread and butter of their single-family purchases.  This approach has made the transactions easier to scale up and more economical, with the Enterprises and taxpayers getting a greater bang for their buck.

As part of our next steps, we want to refine and further standardize the Enterprises’ debt, reinsurance and upfront offerings.  This will help broaden liquidity.  We will continue to work with the Enterprises on other innovative transaction types, such as credit-linked notes.  We will also aggressively continue our work to analyze, assess, and define upfront credit risk transfers.  We are committed to engaging stakeholders as part of this process. 

While a great deal has been accomplished in a short time, it is still early in the development of the risk transfer market.  FHFA and both Enterprises are committed to building on our recent progress, and we view credit risk transfers as a key part of Fannie Mae and Freddie Mac’s credit guarantee business going forward. 

Access to Credit

As we continue to explore innovative CSP, Single Security and risk transfer initiatives, let me assure you that we have not lessened our conservatorship efforts to improve market liquidity by exploring ways to improve access to credit for creditworthy borrowers.  Last year, I spoke to you about the important clarifications that FHFA and the Enterprises were making to the life-of-loan exclusions in the Representations and Warranties Framework, and I announced that FHFA had authorized the Enterprises to launch a 3 percent down payment product offering.  Both of these measures were carefully designed to move the needle on access to credit for responsible borrowers without jeopardizing the safety and soundness of the Enterprises, and both of these measures are now being implemented responsibly and successfully.

In 2015, we also continued to pursue other efforts to provide clarity and transparency on Enterprise practices.  Earlier this month, the Enterprises published guidance that for the first time defines severity levels for loan origination defects and establishes a process for lenders to correct or remedy those defects to the extent practicable.  This new approach calibrates the severity of a defect with the remedy and results in only the most serious defects raising the possibility of a loan repurchase. 

The Enterprises also anticipate releasing updated guidance on servicing remedies by the end of this year.  These clarifications will provide servicers with more transparency on the types of remedies available for servicing breaches and will specifically identify the limited circumstances that would trigger a loan repurchase. 

The Enterprises are also continuing their work to develop an independent dispute resolution program to be used to resolve contested disputes about repurchase requests.  Fannie Mae and Freddie Mac completed a pilot of their independent dispute resolution program design over the summer, and they are now completing assessments of the pilot to inform the final program design. 

An effort that will not be completed this year but will carry over into next year is the work that has been taking place about possible appraisal-related representation and warranty relief.  Both Enterprises have developed tools that provide lenders feedback about appraisal quality and are now using these tools in independent pilots to assess the feasibility of representation and warranty relief on the value of collateral.  These pilots are in their very early stages.  But throughout 2016, we will continue our efforts to provide as much certainty on appraisal-related issues as is possible.

Each of these efforts is intended to provide more certainty to lenders and to do so in a way that is safe and sound for the Enterprises.  We anticipate that greater certainty will translate into fewer credit overlays, lower costs for borrowers, and greater access to credit for creditworthy borrowers.  As I said last year, we expect this to be a two-way street.  FHFA will continue to do what we can to provide certainty and thereby reduce the unintended consequences that follow from uncertainty in the market.  But, we are looking for lenders in return to take the necessary steps to serve creditworthy borrowers who are currently sitting on the sidelines. 

Affordable Rental Housing

While access to mortgage credit and homeownership are critically important, we also remain focused on Fannie Mae and Freddie Mac’s role in supporting liquidity in the multifamily market, and we are especially focused on their roles in support of affordable rental housing.  Households across the country are paying more and more of their income toward rent.  Half of all renters now spend more than 30 percent of their income on housing and 26 percent of renters spend more than 50 percent.  Both of these are sharp increases over the last decade, and we expect these challenges in the rental market to continue.  

Each Enterprise utilizes a different multifamily business model that supports rental housing affordability while also sharing significant credit risk with the private sector.  The Enterprises offer affordable, long-term, fixed-rate loans that enable property owners to have a stable, sustainable mortgage payment and reduce the need to increase rents charged to tenants.  Over 70 percent of rental units financed by the Enterprises over the last few years have been affordable to low-income households. 

The Enterprises’ multifamily programs benefit from strong underwriting standards and correspondingly strong performance, which they sustained throughout the economic crisis.  Because of the credit risk these programs transfer to the private sector, taxpayers are well shielded from losses on Enterprise-supported multifamily loans.

Our annual Scorecard has included a cap on the Enterprises’ multifamily lending volume, with exceptions to the cap for certain affordable lending activities.  Earlier this year, we broadened the categories of affordable multifamily lending that were excluded from FHFA’s cap.  We made these adjustments because the multifamily market grew more rapidly in the first half of 2015 than we had projected and because we wanted the Enterprises to prioritize multifamily purchases of affordable housing.

Looking ahead to next year, FHFA expects to maintain our $30 billion cap for each Enterprise for market rate properties.  To avoid the kind of uncertainty we experienced last year, however, we will institute a quarterly review process to make necessary adjustments if the market grows beyond our initial projections.

We anticipate that next year’s Scorecard will also maintain the broadened list of exclusions from the cap that we put in place earlier this year.  This means that we will continue to exclude from the cap loans for affordable properties, including those in higher-cost areas.  We will also continue to exclude certain loans for manufactured housing communities, as well as seniors housing and small multifamily properties affordable to low-income tenants.  Beginning in 2016, FHFA expects to add two new exclusions – loans for low-income apartments in rural areas and loans for energy efficiency improvements that meet our eligibility criteria.  
Our Scorecard priorities as conservator align with the housing goals regulation we recently finalized for 2015-2017.  In most cases, we increased the goals for the number of affordable multifamily units that we expect the Enterprises to support.  We also required Fannie Mae and Freddie Mac to meet identical multifamily housing goals for the first time.  In light of the strong state of the multifamily market and the need for more affordable units, we believe these goals are both achievable and critical. 

In 2016, we also plan to finalize a Duty to Serve rule, which will encourage Fannie Mae and Freddie Mac to innovate responsibly in the areas of affordable housing preservation, housing in rural areas, and manufactured housing.  Our re-proposed rule on Duty to Serve is forthcoming, and we look forward to getting feedback from all stakeholders. 

Federal Home Loan Banks

Before I conclude, I’m sure a number of you would like for me to say something about the rule FHFA has proposed related to several aspects of Federal Home Loan Bank membership.  Unfortunately, legal constraints prevent me from saying much about this because we are in the period between the end of the comment period and the time we issue the final rule.  I can tell you, however, that we have completed our review of the 1,300-plus comments submitted on the proposed rule, and we are making a concerted effort to finalize the final rule by the end of this year and, if not, certainly within the first quarter of 2016. 


The Federal Housing Finance Agency faces a number of challenges in our role as regulator of the Federal Home Loan Banks and our role as regulator and conservator of Fannie Mae and Freddie Mac.  We have found that substantial new thinking and innovation will be required in all aspects of the housing finance market to meet the needs of both homeowners and the growing number of renters struggling to afford housing.  My remarks today have touched on only a few of the initiatives we are undertaking to meet these challenges.  But I hope these comments have provided some insight into our thinking as we approach 2016. 

Thank you again for inviting me to be here today.

Contacts: Media: Stefanie Johnson (202) 649-3030 / Corinne Russell (202) 649-3032
Consumers: Consumer Communications or (202) 649-3811

Source: FHFA



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.