Trump Housing Watchdog Moves to Ease Fines He Helped Banks Fight

(Bloomberg) -- Brian Montgomery spent years helping lenders fight fines for faulty mortgage underwriting before President Donald Trump nominated him to run a key housing agency.

Now that he leads the Federal Housing Administration, Montgomery is pursuing policies that could make such penalties far less likely.

The FHA, which sells insurance that repays lenders if a borrower defaults, proposed a number of changes to its compliance requirements Thursday to give financial firms more confidence that they can issue loans backed by the agency without running afoul of its rules.

Trump Housing Watchdog Moves to Ease Fines He Helped Banks Fight

“It has become clear that our lending partners are seeking clarity and greater certainty when documenting compliance with FHA requirements,” Montgomery, the agency’s commissioner, said in a statement. “We anticipate that this will encourage more lender participation in FHA business.”

Dimon Complaints

The move follows complaints from JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon and other bankers that it didn’t make sense to participate in FHA loan programs because of alleged violations.

After the 2008 financial crisis, the Justice Department aggressively pursued banks for underwriting mistakes, levying billions of dollars in sanctions, prompting major lenders to pull out. Most of the biggest issuers of FHA mortgages are now non-bank lenders.

One consultant who helped banks navigate the post-crisis legal challenges: Montgomery. After an earlier stint as FHA commissioner during the Bush administration, he helped found the Collingwood Group, a Washington-based firm that specializes in FHA-related penalties and lawsuits. Collingwood Group’s clients included Wells Fargo & Co. and US Bancorp.

FHA insurance enables borrowers to get mortgages with comparatively low credit scores and down payments, making its loans a favorite among first-time home buyers. The agency, which is part of the Department of Housing and Urban Development, said it will seek public comment on its Thursday proposal for 30 days.

Montgomery, in the statement, said the changes would give lenders more transparency, while preserving the FHA’s “enforcement authority.”

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