President Barack Obama on Monday named a longtime real-estate industry executive to head the Federal Housing Administration, which during the U.S. housing market's bust has become the main provider of loans to borrowers with weak credit.
The White House on Monday named David Stevens as assistant secretary at the Department of Housing and Urban Development.
The position requires Senate confirmation and would put Stevens in charge of the FHA, the government-run mortgage-insurance program. In the wake of the subprime lending market's collapse, the FHA has become just about the only source of loans to borrowers with poor credit records and low down payments.
The FHA allows borrowers to take out home loans with a down payments of as low as 3.5 percent, compared with 20 percent for a typical loan that doesn't require mortgage insurance.
Stevens is currently president and chief operating officer of Long and Foster Cos., a Chantilly, Va., based real estate brokerage. He previously worked at Wells Fargo & Co., mortgage finance company Freddie Mac and World Savings Bank, a California-based lender.
One big challenge for Stevens will be the U.S. mortgage market's increasing dependence on FHA loans, which are made through by banks, insured by the government and sold as mortgage backed securities by Ginnie Mae, the government's mortgage finance agency.
In the fourth quarter of 2008, the FHA backed about a third of new home loans, up from about 4 percent in 2005, according to Inside Mortgage Finance, a trade publication.
But with the agency's role growing, some lawmakers are worried that the government will wind up on the hook should defaults and foreclosures surge further.
The program "poses significant risks to taxpayers, and therefore requires diligent oversight," Sen. Richard Shelby, R-Ala., said at a hearing earlier this year.