President Donald Trump is preparing to nominate Brian Montgomery, who served for eight years under George W. Bush, to run the Federal Housing Administration, according to White House and industry people with knowledge of the decision.
While the White House has signaled that it wants Montgomery for the job, his nomination won’t be announced until he completes requisite background checks.
If nominated and confirmed, it will be Montgomery’s second tour as FHA commissioner. He held the job under Bush, staying on for six months after former President Barack Obama’s inauguration. Prior to joining the agency, he was at the White House, serving as deputy assistant to the president from 2001 to 2005. He is currently vice chairman of the Collingwood Group, a housing finance consulting firm he co-founded.
The FHA, a unit of the Department of Housing and Urban Development, is one of the country’s biggest sources of funding for home loans. The agency needed a $1.7 billion cash infusion from the Treasury after the 2008 housing collapse sent millions of homeowners into default on FHA-insured mortgages.
Now that home prices have bounced back, FHA is in the black but threatened with underfunding and outdated technology. Only hours after being sworn in as president, Trump blocked an Obama plan to lower the insurance premiums FHA collects from homeowners.
Montgomery, who must be confirmed by the Senate, has raised concerns about the state of the housing market and regulation of mortgages. Nine years after the subprime lending bubble, lawmakers have yet to retool the nation’s mortgage infrastructure.
Given the FHA’s size and its mission to help lower-income and first-time homebuyers, the incoming commissioner promises to be a central voice in the debate on housing reform. HUD Secretary Ben Carson has said his agency "absolutely" will help shape Trump policy on mortgage reform.
While at Collingwood, Montgomery also has flagged the FHA’s use of the False Claims Act to target lenders that do business with the agency. Between 2009 and 2015, mortgage lenders paid billions of dollars to settle claims that they defrauded the government program, which insures lenders and mortgage investors against defaults on loans they make to homeowners.
The enforcement has driven banks away from FHA lending, leaving non-bank lenders such as Quicken Loans to dominate the market. Quicken has refused to settle its own False Claims Act charges and is fighting the agency in court.
Montgomery has said that "excessive enforcement" on mortgage lenders has prevented many Americans from becoming homeowners and building household wealth.
"Prospective homebuyers, including many who are first-time buyers with perhaps a blemish or two on their credit score, are largely shut out of the mortgage market from this stifling of housing credit," he told POLITICO in late November.
"Understandably, the industry remains hyper-focused on originating low-risk loans with a difficult-to-achieve goal of zero underwriting defects," he wrote. "Despite the proliferation of regulations and measures intended to improve the mortgage market with consumer safeguards, the housing market recovery remains sluggish, and too many American workers continue to lose access to the wealth-accumulating tool of homeownership."
"To restore housing to its traditional role as an engine of economic growth and opportunity, the incoming Trump administration should pursue policies designed to make the path to homeownership possible again for fully-informed prospective buyers who have the ability to carry a mortgage," Montgomery wrote.