FHFA Prepared Remarks of Melvin Watt

On September 8, the Federal Housing Finance Agency (FHFA) released the prepared remarks of Melvin L. Watt at the North Carolina Bankers Association’s American Mortgage Conference.

Prepared Remarks of Melvin L. Watt At the North Carolina Bankers Association’s American Mortgage Conference

?Prepared Remarks of Melvin L. Watt
?Director, Federal Housing Finance Agency
At the North Carolina Bankers Association’s?? American Mortgage Conference?

Thank you for inviting me to be here with you in Raleigh this evening, and thank you for that introduction.

I’ve had a busy year, and the Federal Housing Finance Agency (FHFA) has had a busy summer.  I spent a lot of time early on building a top-notch team of Advisors, getting to know the very qualified staffs I inherited at FHFA, Fannie Mae, Freddie Mac and the Federal Home Loan Banks.  I have also spent a lot of time trying to move the mortgage finance markets back to more normalized and predictable certainty, by trying to get to know the leaders, resolve pending litigation and move toward a more satisfactory representation and warranty framework. 

And, this summer, I’m sure that many of you have noticed, FHFA has requested feedback on five key issues over the last few months, which,  taken together, address both our conservatorship strategic goals for Fannie Mae and Freddie Mac and our responsibilities as regulator of Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System.  In June, we urged stakeholders to submit feedback on guarantee fee levels for Fannie Mae and Freddie Mac (together “the Enterprises”).  In July, we asked for input on eligibility requirements for the Enterprises’ private mortgage insurer counterparties.  In August, we released a proposed Single Security structure, which we hope will generate stakeholder responses and discussion about this approach.  In August, we also issued a proposed rule on the Enterprises’ housing goals for 2015 through 2017.  And last week, we put out a proposed rule to update and clarify certain aspects of Federal Home Loan Bank (Bank) membership requirements. 

With all of these requests and notices, I’m guessing that we’ve been now keeping many of you quite busy, but I want to underscore the importance of receiving your feedback.  To further this ongoing dialogue, today, I’d like to highlight some issues and next steps for each of the five releases I just mentioned. ?

Today is the deadline for public feedback on our requests for input about guarantee fees and private mortgage insurance.  One of the first decisions I made as Director of FHFA was to suspend increases in guarantee fees that had been announced by FHFA in December of 2013.  Given the impact of these fees on the Enterprises, the housing finance markets, and on borrowers, I believed that it was critical to evaluate this issue and to get feedback from stakeholders.  After additional work at FHFA, we issued a Request for Input that provides further details on how the Enterprises set these fees.  The request also posed a number of questions to prompt substantive feedback about how guarantee fee levels affect various aspects of the mortgage market.

FHFA has also continued to advance efforts to strengthen Fannie Mae and Freddie Mac’s counterparty requirements for private mortgage insurers.  When a borrower makes a down payment of less than 20 percent, these mortgages are required by statute to have some private capital standing behind the loan in order to qualify for purchase by Fannie Mae or Freddie Mac.  Private mortgage insurance has always played an important role in meeting this requirement and, as the recent crisis revealed, it is critical to make sure that this coverage is available in both good times and in bad times.  To this end, FHFA released a Request for Input on draft Private Mortgage Insurer Eligibility Standards.  Our objective is to have the Enterprises strengthen their risk management by enhancing the financial, business and operational requirements in place for their private mortgage insurer counterparties.

Moving forward, FHFA will review and consider the input we have received as part of our comprehensive evaluations of the guarantee fee and the private mortgage insurance issues.  Consistent with our statutory mandates, our assessments and policy decisions will take into account both safety and soundness considerations and possible impacts on access to credit and housing finance market liquidity.  While we understand that these topics are inter-related, which is why we decided to align the submission deadlines, I do want to note that FHFA expects to proceed with separate decisions on these topics after completing our evaluations. 

Let me move on to discuss the recent Request for Input on the Proposed Single Security Structure.  FHFA is in the early stages of developing a Single Security, and we released this request to facilitate robust discussions and input from all stakeholders and the public. 

In working toward a Single Security, there are four aspects of the proposed structure that I want to highlight.

First, FHFA’s top priority in pursuing the Single Security is to deepen and strengthen liquidity in the housing finance markets.  This is a technical topic, but getting this right will have real world benefits for the markets and for borrowers.  An effective Single Security will support a more liquid “to-be-announced” (TBA) market for mortgage-backed securities.  Borrowers may not understand what the TBA market is or how it works, but the forward-trading that takes place in TBA securities means that borrowers can get a mortgage rate locked-in when they are house hunting.  The TBA market also adds efficiencies to the process, which reduces transaction costs and results in lower mortgage rates for borrowers.  We believe a Single Security can enhance these benefits and further strengthen market liquidity by reducing the trading disparities between Fannie Mae and Freddie Mac securities.  

Second, we propose leveraging the existing security structures used by the Enterprises for the Single Security.  This would avoid designing a structure from scratch and we hope this approach will give market participants and investors a sense of familiarity with the way the Single Security would operate and perform.  In the proposal, the Single Security would use many of the security features in Fannie Mae MBS and the disclosure regime used by Freddie Mac PCs. 

Third, FHFA’s proposal also focuses on the importance of making Fannie Mae and Freddie Mac’s existing securities equally interchangeable with the future Single Security.  This is essential to meet our goal of developing a more liquid housing finance market.  Without sufficient market flexibility allowing investors to trade between legacy securities and future Single Securities, current market liquidity could be impacted.  Under our proposal, we believe that market participants will likely view legacy Fannie Mae and Freddie Mac securities as interchangeable with a Single Security.  This approach should facilitate equal treatment between Fannie Mae and Freddie Mac legacy securities.  Getting feedback on this approach is critical to our success moving forward.  

The fourth point I want to touch on is about the agency’s timing for the development of a Single Security.  Our proposal states this several times, but I want to emphasize that FHFA’s proposed structure and request for input is the first-step in a multi-year process.  We understand that there are a number of moving parts between the present and a future implementation date, and we understand that this process will take time.  As our immediate next steps, FHFA will work with the Enterprises to process the feedback we receive and we will move forward in a deliberative and transparent manner.  FHFA will continue to produce progress reports that include Common Securitization Platform and Single Security updates where appropriate.

The next two priority areas involve FHFA’s responsibilities as regulator of Fannie Mae, Freddie Mac and the Federal Home Loan Banks. 

First, at the end of last month, FHFA proposed a rule for Fannie Mae and Freddie Mac’s housing goals for 2015 through 2017.  This rulemaking is a statutory requirement set forth in the Housing and Economic Recovery Act, and the comment period is open for a sixty-day window through the end of October.  We know that challenges exist in today’s housing market that make it difficult for many lower-income families to access mortgage financing or to find an affordable apartment to rent.  Fannie Mae and Freddie Mac do not originate mortgages themselves, but the housing goals measure the number or percentage of Enterprise mortgage purchases that provide homeownership and affordable rental housing opportunities for these families.  I hope that all of you take a close look at our proposed rule and the questions it raises about how best to set Fannie Mae and Freddie Mac’s housing goals to encourage responsible lending that is done in a safe and sound manner and serves the single-family and rental housing needs of lower-income families.

For the housing goals that focus on affordable single-family mortgages, FHFA is asking for feedback on three alternative ways to set these goals.  Alternative 1 would use a combination of forward-looking benchmarks coupled with a retrospective analysis of how the overall market performed in a given year.  Alternative 2 would use only the forward-looking benchmark and Alternative 3 would rely solely on the retrospective market analysis.  There are advantages and disadvantages to each of these, and we hope to receive robust feedback from commenters to aid the agency in making a decision among these alternatives in the final regulation.

On the goals that address affordable rental units in multifamily buildings, FHFA has asked for comments on creating a new category for small multifamily properties that have apartments affordable to low-income families.  Units in these smaller apartment buildings can be an important source of affordable rental housing, but the Enterprises have had limited purchases in this market segment in recent years.  Our proposed rule would create a new subgoal to provide transparency about Enterprise activity in this area, but, in an effort to take a gradual approach, we have proposed relatively low benchmarks. 

Just after Labor Day, FHFA also released another proposed rulemaking involving membership requirements for the Federal Home Loan Banks.  I am aware that the proposed rule has generated significant discussion within the industry, and I encourage stakeholders to submit their views during the comment period.  In our role as regulator, FHFA has a responsibility to ensure that the Banks are fulfilling their mission to support housing finance and that they are doing so in a safe and sound manner that complies with their statutory requirements.  To further facilitate this mission and demonstrate that members are engaged in housing finance, FHFA has proposed requiring Bank members to demonstrate ongoing mortgage lending activity instead of a one-time test used when an institution applies for membership. 

In addition, FHFA has proposed clarifying the definition of insurance company in such a way that captive insurers would no longer be eligible for Bank membership.  While captive insurers may, in some cases, be involved in housing finance, their access to the Federal Home Loan Bank System raises a number of concerns that are discussed in the proposed rule.  We look forward to receiving your comments on both of these topics.    

I hope that my comments today have helped frame some of the issues that we are currently evaluating at FHFA.  As I have mentioned throughout my remarks, FHFA will consider the feedback we receive from stakeholders as part of our further evaluation of these five policy areas.  Of course, as we conduct these evaluations and proceed with our decision-making process, FHFA will continue to balance its mandates of ensuring safety and soundness and ensuring broad liquidity in the housing finance markets.  ?

Thank you again for inviting me to be here this evening, and I look forward to our ongoing dialogue on these important matters.

Please click here to view the online remarks.

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.