Senate Committee Considers Montgomery Nomination for FHA Commissioner
The Senate Banking Committee today held a hearing to consider President Trump’s nomination of Brian Montgomery to be Commissioner of the Federal Housing Administration (FHA) and HUD Assistant Secretary for Housing.
In his opening statement, Chairman Mike Crapo (R-ID) lamented that it has been over three years since FHA has had a Senate-approved Commissioner. Crapo said Montgomery is an ideal candidate for the position because he led FHA during “one of the most trying times that housing markets has ever seen.” Montgomery previously served as FHA Commissioner from 2005 to mid-2009. Ranking Member Sherrod Brown (D-OH) echoed Crapo’s sentiment that it has been far too long since such an important position has been filled by a Senate-approved candidate. Brown said he is counting on Montgomery to be a strong advocate within the Administration for HUD programs in the face of the Administration’s proposed 15 percent cut to the Department.
In his opening statement, Montgomery said he would look to increase homeownership opportunities for low-and moderate-income Americans by providing regulatory clarity to FHA’s lender partners. He said this would provide lenders the certainty they need to originate more FHA-insured mortgages.
Montgomery also highlighted the importance of improving FHA’s technology, arguing that such upgrades would reduce financial risk for taxpayers and “ensure FHA can operate on a stable platform for years to come.” He also pledged to continue the agency’s support for affordable multifamily lending and complimented former HUD Secretary Shaun Donovan for his efforts in that area.
Crapo, Brown, and Senator Catherine Cortez Masto (D-NV) all asked Montgomery about the U.S. Department of Justice (DOJ) using the False Claims Act to seek damages from banks due to fraudulent FHA loan claims. Montgomery stated that he believes DOJ “stepped in front” of FHA in enforcing these fraudulent claim decisions and said the use of the False Claims Act to procure several billion dollars in settlements has had an adverse effect on FHA and the borrowers it serves due to many banks and lenders discontinuing their FHA lending programs.
Montgomery reiterated several times that FHA has a duty to prevent fraud in its programs but attributed most of the lender wrongdoing in the DOJ settlement cases to clerical or immaterial errors rather than fraud. Montgomery questioned whether the False Claims Act was an appropriate tool for enforcing FHA loan underwriting compliance. HUD Secretary Ben Carson said earlier this week that HUD is working with DOJ to clarify rules regarding penalties concerning FHA loans.
Senator Jon Tester (D-MT) asked Montgomery how he planned to work within the constraints placed on HUD if the Administration’s proposed budget for fiscal year 2018, which proposed $13 billion in cuts to HUD programs, were to come into effect. Montgomery told Tester that he had worked as FHA Commissioner before under budget constraints and, although he was not personally involved in crafting the Administration’s proposed budget, he was prepared to fight for programs that he believes in moving forward.
Several Democrats pressed Montgomery about his recent private sector work with the Collingwood Group, a consulting organization he co-founded that advises lenders on how to deal with the Government-Sponsored Enterprises (GSEs) and FHA. In response to a question from Brown, Montgomery said that he was prepared to remove himself from the firm completely should he be confirmed and recuse himself from any FHA issue that presented a conflict of interest. Senator Elizabeth Warren (D-MA) argued that Montgomery’s experience with Collingwood made it hard to trust that he would act in the public interest and urged the Committee to reject his nomination.
In response to a line of questioning from Senator John Kennedy (R-LA) about how HUD can stretch affordable housing dollars to serve more people, Montgomery strongly endorsed the Low Income Housing Tax Credit (Housing Credit) program. Montgomery said that he was aware of legislation to increase Housing Credit allocations for each state, which he said he personally supports.
The Committee also was considering the nominations of Robert Kurtz to be Assistant Secretary for Public and Indian Housing and Suzanne Tufts to be Assistant Secretary for Administration during the hearing. The Committee has not yet scheduled a vote for any of the nominees.