channing, montoya letters 2-29-16 re: david h. stevens

Board of DirectorsKen Boehm, ChairmanPeter Flaherty, PresidentMichael FalconeKurt ChristensenDavid Wilkinson

Founded 1991

February 29,2016

VIA CERTIFIED MAIL

Channing D. PhillipsUnited States AttorneyOffice of the United States Attorney555 4'h Street, NWWashington, DC 20530

Re: Investigation of David H. Stevens for Possible Violations of Federal Ethics Laws

Dear Mr. Phillips:

I respectfully request that your office promptly investigate whether David H. Stevens violated 18

U.S.C. $ 207 by engaging in restricted activities while serving as an employee in the executivebranch and after his departure from the federal government, and 18 U.S.C. $ 208 by participatingpersonally and substantially in restricted matters that affected his own financial interests as well as

the hnancial interests of those for which he had an arrangernent concerning prospective employment.

Background

On Decemb er V , 2015, the New York Times published a front page article describing how "a behind-the-scenes effort of Wa1l Street banks to take over the mortgage market is driven by advocates whoswitch between roles in Washington and the private sector." 1 The investigation by the Times - as

1 Morgenson, Gretchen. "A Revolving Door Helps Big Banks' Quiet Campaign to Muscle Out Eannie andFreddie." New York Times.Tbe New York Times Company, A7 Dec-2O15.

tittp:i/wrvw.nytin:es.com/20 I 5112l0Tlbusiness/a-revolvi:rg-c1oor-helps-big-banks-eirriet-campaignrto-rnLrscle- ou t-lannie-and-lieddie.htmlLr:0

107 Park Washington Court. Falls Church, VA. 22046703-237-l 970. fax 703-237-2090. www.nlpc.org

"promoting ethics in public life"

well as a subsequent investigation by Politico - reveals that several former Obama administration

officials, including Mr. Stevens, have engaged in activities that appear to violate numerous federal

ethics laws and regulations.2 Specifically, while serving as Assistant Secretary for Housing and

Commissioner of the Federal Housing Adminiskation ("FHA") at the U.S. Department of Housing

and Urban Development ("HUD") from 2009 - 20L1, Mr. Stevens participated personally and

substantially in decisions about mortgage lenders (including the nation's largest banks) and mortgage

insurers, including two publicly traded, shareholder-owned companies - Fannie Mae ("Fannie") and

Freddie Mac ("Freddie," and collectively with Fannie, the "G-SEg"). After departing the federal

government, Mr. Stevens appears to have possibly violated his ban on appearing before the United

States Government about, among other things, matters pertaining specifically to the GSEs by

assisting the nation's largest banks and private mortgage insurers in an effort "to unseat Fannie and

Freddie ... and capture their share of the profits in the country's $5.7 trillion home loan market."3

Matters Relating to 18 U.S.C. S 207

Federal statutes 18 U.S.C. $ 207(aX1), 207(a)(2), and 207(c) impose certain restrictions on former

senior employees of the executive branch. Regulatory guidance published by the Office ofGovernment Ethics ("OGE") at 5 C.F.R. * 2641.101 specifies that a "Senior Employee" means any

employee who is "appointed by the President to a position under 3 U.S.C. $ 105(a)(2)(B).'' On

March 23,2009, President Obama announced his intent to nominate Mr. Stevens, and on July 10,

2009, Mr. Stevens was sworn in as President Obama's appointee, thus rendering him a "Senior

Employee" during his tenure in the executive branch from 2009 - 2077 -5

2 Gerstein, Josh. "How Obama Failed to Shut Washington's Revolving Door." Politico.3l Dec. 2015. The

Politico investigation revealed thatPresident Obama's pledge to "shut Washington's revolving door" has

floundered "against the deeply ingrained culture of selling government expertise in Washington" as well as by"major loopholes and a loss of focus over time." ln December 2007, Obama stated:"The revolving door - the

pattern of people going from industry to agency, back to industry. . . will be closed in the Obama White House.

When I'm President of the United States, if you want to work for my administration, you can't leave my

administration and then go lobby."

3 Morgenson, Gretchen, "A Revolving Door helps Big Banks' Quiet Campaign to Muscle Out Fannie and

Freddie," New York Times. The New York Times Company, 07 Dec. 2015.

http:r'rwwrv.nlrtimes.corB/2015i l2l07ibusiness/a-rgvolving-door-helps-bifbanks-quiet:gampaign-to-muscle-out-fannie-and-freddi e.html'?-r:0

a Potts,StephenD."gZX20rLettertoDesignatedAgencyEthicsOfficialDatedJuly23,,!99Z."U.S.OfficeofGovernment Ethics ,23 July 1992.

http:liryrn w.oge. gr:v/DisplalzTeruplatesiModelSub.aspx?id:2 1 47483752

s Wooley, Lemar, "HUD Archivesl David Stevens Sworn in as HUD Assistant Secretary for Housing and FHA

Commissioner." U.S. Deportment of Housing and Urban Developmenr. 15 ]uly 2009

http ;ilarchives.irud. govinews/2009ipr09- 1 20. -cfm

OGE guidance states that Section 207 not only "prohibit[s] former officials from communicating or

appearing on behalf of persons or entities with respect to matters in which the former officials

'personally and substantially participated' during their government service," but Section 2A7 allso

'prohibit[s] former officials from 'aid[ing] or advisfing]'persons or entities on such matters." 6

The most restrictive of these laws is Section 2A7@), which only applies to "Senior Employees" and

lasts for one year following departure from federal service. OGE has emphasized that Section 247@)

prohibits "any communication, on any matter, whether they ever worked on it, [or] was ever pending

in the agency ... a walling off of Senior Employees from communicating back to their former

agencies." 7

Notwithstanding Section20T(c), the law explicitly restricts all civil servants - including Mr' Stevens* from making representations before an agency of the executive branch ot particular matters after

departing the federal government.s Specifically, Mr. Stevens is barred from "knowingly mak[ing],with the intent to influence, any communication to or appearance before any officer or employee ofany department, agency, court, of the United States, on behalf of any other person in connection witha particular matter: (a) in which the United States is a party or has a direct and substantial interest; (b)

in which the person participated personally and substantially as such officer or employee; and (c)

which involved a spLcific party or specific parties at the time of such participation."e These

restrictions under 207(a), unlike those of Section 207(c), are not time-limited'

6 Guerra, f oseph R. "Communications Under 18 U.S.C. S 207." U.S. Department of Justice. 19 July 2001.

htqr:l/r,vww.iustice.govisites/default/fllesiolc/opinionsl200 i/01/3 I iop-olc-v025-p0059.pdf

7 "Post-Government Employment Restrictions massive Open Online Course [MOOC)." YouTube. OGE Institutefor Ethics in Government,2Lluly 201'5.

https;liu,

e Cusick, Robert L "'Particular Matter Involving Specific Parties,' 'Particular Matter,' and'Matter."' Office ofGovernment Ethics. Office of Government Ethics, 4 October 2006. Web. 6 Dec. 2015. "The definition in 18

U.S.C. S 207[iX3) provides: the term'particular matter' includes any investigation, application, request for a

ruling or determination, rulemaking, contract, controversy, claim, charge, accusation, arrest, or iudicial orother proceeding. This language differs slightly from other references to 'particular matter.' However, OGE

does not believe that the absence of such a general catch-all phrase means that the list of enumerated matters

exhausts the meaning of particular matter' under section 2017(i)(3). The Iist is preceded by the word'includes,'which is generally a term of enlargement rather than Iimitation and indicates that matters otherthan those enumerated are covered."

e Guerra, Joseph R. "Communications Under 18 U.S.C. S 2O7." U.S. Department of Justice. 1'9 luly 20O'1,'

"Congress responded by eliminating the requirement that a matter be 'pending' or of direct and substantial

interest' to an agency and by broadening to prohibition to cover 'any matter on which such person seeks

official action.' 18 U.S.C. S 207[c). In addition, section 207(c] previously prohibited' any oral or writtencommunication'and barred certain'appearances'in a separate clause. The maiority and dissenting opinionsin Nofziger disputed whether this language created separate offenses with different mens rea requirements'Congress changed the language of section 2O7(c). which now bars 'any communication to or appearancebefore' the agency, to clarify that the mens rea requirement is the same regardless of whether a person makes

a 'communication' or 'appearance."' United States of America. United States Office of Government Ethics.

Compilation of Federal Ethics Laws.

Mr. Stevens is subject to these restrictions because: (i) the United States has a direct and substantial

interest in the GSEs given the ongoing conservatorship administered by the Federal Housing Finance

Agency ("EHEA") and the substantial involvement of the United States Treasury ("Treasury") in

financial and operational matters at Fannie and Freddie; (ii) Mr. Stevens participated personally and

substantially as an employee of the executive branch on GSE and other related housing finance

matters; and (iii) Mr. Stevens was directly involved with matters pertaining to Fannie and Freddie as

specific parties.

The involvement of Mr. Stevens in implementing regulations, crafting policies, and defining rules

that had direct, specific, and material impact on Fannie and Freddie would constitute "substantial

participation" because his involvement wis "of significance to the matter."lo Indeed, in his role at

11Up, Mr. Stevens worked closely with cabinet-level officials, including the Secretary of Housing

and Urban Development, and regularly communicated his views and influenced decisions that

specif,rcally impacted Fannie and Freddie.ll

While serving at FHA, Mr. Stevens was listed as part of the "government team" working on "The

Future of Housing Finance" and submitted written testimony to Congress demonstrating his personal

and substantial involvement with matters pertaining to Fannie and Freddie: "As Fannie Mae and

Freddie Mac's market presence shrinks, the Administration will coordinate similar reforms at FHA to

ensure that the private market - not FHA - picks up that new market share ... As we work with the

Federal Housing Finance Agency to pursue increased pricing for guarantees at Fannie Mae and

Freddie Mac, we will also increase the price of FHA mortgage insurance ... Going forward we willcoordinate reforms of Fannie Mae and Freddie Mac with changes at FHA to help ensure the private

market, not FHA, fills the market opportunities created by reform."r2

Moreover, as a HUD proposal on "Credit Risk Retention" reveals, Mr. Stevens was substantially

involved with matters relating to credit risk retention, qualified residential mortgages ("QRM"),

Regulation Z, andthe Truth in Lending Act ("TILA"), all of which relate to and affect the businesses

of Fannie and Freddie.l3 Further evidence of his personal and substantial involvement in these

LO Id,

rr United States. Cong. House. House Financial Services Committee's Subcommittee on Insurance, Housing,

and Community Opportunity. U.S. Department of Housing and lJrban Development. By David H. Stevens. L 12th

Congress, L't session. H Doc. U.S. Department of Housing and Urban Development, 16 Feb' 2011'

http:,rifi nancial services.house. govirnedialpdfl02 I 6 I 1 stevens'pdf

12 Id.

rg "Credit Risk retention {Proposed RuleJ." IJ.S. Securities and Exchange Commissian U.S. Securities and

Exchange Commission, 3'L Mar. 20ll

htQs :1iwww. sec. govlniies/finali20 l 4/34-73407. pd1

matters can be drawn from a HUD letter authored by Mr. Stevens titled "Real Estate Settlement

procedures Act (RESpA) and FHA Related Policies."l4 The Real Estate Settlement Procedures Act

is "applicable to all federally related mortgage loans" which, among other things, is defined as

"[Loans] made by and intended to be sold by the originating lender or creditor to Fannie Mae."15 As

his biography indicates, Mr. Stevens was "responsible for overseeing the $600 billion FHA insurance

portfolio and HUD's multifamily subsidized housing program. In addition, he over[saw] HUD'sregulatory responsibilities in the areas of the Real Estate Settlement Procedures Act, and the

manufactured housing industry."l 6

In March 2}ll, Mr. Stevens left FHA and joined the Mortgage Bankers Association ("\48A") as

President and Chief Executive Officer where "he is known inside the beltway as a key housing

influential; serving as an industry authority on major mortgage finance legislative and regulatory

issues."lT Based upon biographical information and public statements provided by Mr. Stevens, it isclear that he participated personally and substantially in decisions affecting Fannie and Freddie.

As evidenced below, the conduct of Mr. Stevens since his departure from the federal govemment

appears to constitute textbook and willful violations of 18 U.S.C. 5 207 that should be thoroughly

investigated. While there appear to be over 25 instances in which Mr. Stevens may have violated the

law, this letter only highlights a few representative examples. A comprehensive list of these possible

violations is attached as Appendix A.

. Nature of Possible Violation: Mr. Stevens may have violated 18 U.S.C. $ 207 by submitting a

letter to HUD, his former employer, on specific matters within the one-year ban applicable to

Senior Employees.

Details of Possible Violation:

1a Stevens, David H. "Real Estate Settlement Procedures Act IRESPA) and FHA related Policies." U'S.

Department of Housing and Urban Developmenr. 30 Dec. 2009'

lrttp :l/portal.hud. gov/hudportalldocumentslhucldoc'lici:09 -5 3m1.pdf

ls ReaI Estate Settlement ProceduresAct Washington, D.C.: Department of Housing and Urban Development

Office of Neighborhoods, Voluntary Associations, and Consumer Protection, L979. Board of Governors of the

Federal Reserue System. U.S. Department of Housing and Urban Development. Web. 5 Dec. 2015.

http:iiportal.hud.gov/hudportal/H.UD?src:lproglam:ofticeslhor:singiflnra/res/respa:hm

16 HUD Archives: David Stevens Sworn In As HUD Assistant Secretary for Housing and FHA Commissioner.

U.S. Department of Housing and Urban Development, L5 Iuly 2009'

http :iiarchives.hud. govrnei.r,si2009ipr09- 1 20. cfm

tz "David Stevens." Mortgage Bankers Association.5 Dec. 2015

https :/i r,vww.rn ba. orgl'r.vhe-rrye:arelmanagemgnt/david-ste-r"etrs

o In August 2011, Mr. Stevens kansmitted a letter to HUD seeking to influence matters relating

to credit risk retention, a topic in which he had been directly and substantially involved while

serving at thatugency. 1 8

Nature of Possible Violation: Mr. Stevens may have violated 18 U.S.C. $ 207 by influencing

HUD, his former employer, on restricted matters by transmitting a letter within the one year

applicable to Senior Employees and in violation of the permanent lifetime ban.

ban


o On August !,20t1, four months after leaving HUD, Mr. Stevens transmitted a letter to HUD

in an attempt to influence the agency's position on "credit risk retention."le

o On October 24,2013, Mr. Stevens transmitted a letter to HUD in an attempt to directly

influence matters pertaining to "credit risk retention."20

. Nature of Possible Violation: Mr. Stevens may have violated 18 U.S.C. 5 207 by influencing

the Consumer Financial Protection Bureau ("CFPB") on restricted matters after departing the

federal government.


o On April 6, 2012, Mr. Stevens transmitted an e-mail to the CFPB Director titled '?otential

Impacts of QM."o In the e-mail, Mr. Stevens stated: "I wanted to share some personal thoughts with you about

QM in a way that might articulate a few of the key considerations in a less formal but

hopefully clear way. I hope this helps to clarify some of the points being discussed. Look, I

18 Stevens, David H. "Re: Credit Risk Retention Proposed Rule." Letter to the Office of the Comptroller of the

Currency, Board of Governors ofthe Federal Reserve System, Federal Deposit Insurance Corporation,

Securities and Exchange Commission, Federal Housing Finance Agency, Department of Housing and Urban

Development Regulations Division. 1 Aug. 2011'

https:i/wrvw.fdic. goviregrilationsllaws/federal/20 1 [ / 1 1 c224ad74'PDF

1e "Credit Risk Retention Proposed Rule," Mortgage Bankers Association- Federal Deposit Insurance

Corporation, 1 Aug. 2011.

Irttps://www.lUic"govlregnlations/laws/f'ederal/201 1i "1 1c224ad74.PDF

20 Stevens, David H. "Credit Risk Retention Proposal." Mortgage Bankers Association. Letter to Federal

Housing Finance Agency, Department of Housing and Urban Development.24 Oct 20L3.

e.sclv/SECR.

1ali 102ai3 111429 581213386453 l.pdfr112tR-l

know I head this MBA, but I am also a 30 year veteran of this iqdustry and someone who

spent a couple of years inside working on policy as you both know.2l

o ffr" e-mail prompted the CFPB to subsequently document the receipt of ex parte

communication in a formal memorandum.22


FHFA on restricted matters after departing the federal government.


o While serving in the federal govefirment, Mr. Stevens provided sworn testimony to the House

Financial Services Committee on risk-sharing, capital standards, and GSE reform, noting

that: "We will also consider a range of reforms, such as risk-sharing with private lenders to

reduce the risk to FHA and the taxpayer ... Going forward we will coordinate reforms ofFannie Mae and Freddie Mac with changes at FHA to help snsure the private market, not

FHA, fills the market opportunities created by reform."23

o On September 15, 2014, Mr. Stevens transmitted a letter to FHFA influencing the agency on

risk-sharing, etigi|itity standards for mortgage insurers, and GSE reform.2a

o In the letter, Mr. Stevens states that: "FHFA should adopt a program to utilize greater up-

front risk-sharing on high LTV loans and coverage on loans with LTVs below 80%,

accompanied by a reduction in G-fees."2s

o Mr. Stevens also directly influenced FHFA on GSE reform and development of a common

security between Fannie Mae and Freddie Mac, emphasizing that "FHFA Should Direct the

GSEs to Move to a Common, Fungible Security."26

21 Stevens, David H. "Potential Impacts of QM." Message to Richard Cordray. 6 Apr. 2012. E-mail.

zz Martinez,Zixta Memorandum : Email and Attachmentfrom David Stevens (Mortgage bankers Association) to

Richard Cordray (CFPB) and Raj Date (CFPB),6 Apr.2AtZ.

23 "Written Testimony of David H. Stevens." l).5. Department of Housing and Urban Development. House

Financial Services Committee, 16 Feb. 2011.

http :#fiqancialser-vices.house. govlmediarpdfT02 I 6 1 i stcvens..pdf

24 Stevens, David H. "FHFA Strategic Plan 2015-19 Response." Letterto Federal HousingFinanceAgencyOffice of Budget and Management. 15 Sept. 2014.

https:i/www.rnba.o:gr'Documents/mba.orglfiles/CREFiClREFCouncilsiMBALtrtoFHFAonStrategicPlan2015-19.pdf

2s Id.

26 Id.

According to Fannie Mae, credit risk transfers "allows [Fannie] to share credit risk on ftheir]guaranty book of business with private market participants-"27

On September 9,2015, Mr. Stevens transmitted another letter to FHFA influencing the

ageficy on risk-sharing: "FHFA has made substantial efforts to reduce taxpayer exposure to

rist< Uy requiring Fannie Mae and Freddie Mac to undertake credit risk kansfers. MBA fullysupports this effort and we ask that you consider a meeting with MBA and several of our

lender members to discuss ideas on how to conduct these risk transfers." 28

Nature of Possible Violation: Mr. Stevens

related to his future employer after receivrngfederal government.

violated 18 U.S.C. 5 207 by influencing matters

an offer of employment while still serving in the


o Beginning no later than March 6,2011, Mr. Stevens was employed at HUD and in advanced

discussions for employment with the MBA.o On March 6,2011, Mr. Stevens received an offer to serve as President and Chief Executive

Officer of MBA.2eo On March 8,2011, Mr. Stevens met with two housing industry groups after receiving the

employment offer from the MBA while still serving as a Senior Employee in the federal

government "to discuss new and updated FHA^policies and trends affecting them and the

iingle family and multifamily housing industry."30

zz "Credit Risk Sharing." Fannie Mae. Fannie Mae, 9 Sept. 2015.

http:l/fanniemae.comiportallfuncling-the*narket/credit-rislatndex.htr:rl

28 Stevens, David H. Letterto Federal Housing Finance Agency. 30 Nov' 2015.

2s Horwltz,Jefl and Kate Berry. "MBA Head Cozy with Banks While at the FHA." American Banker. Source

Media, Aug. 2011. Read: Stevens says he was planning to take a iob in New York at the time and only received

a call from the MBA in late February. His calendar lists a dinner with MBA chairman Michael Berman on

March 2. Stevens received a "last minute" offer four days later, he says'"

htto:llw issues/1 7

30 Id.

FHA commissioner Stevens Met colorado ReaI Estate Professionalsfitlortgage lndustry' Digital image'

Department of Housing and Urban Development, n'd. Web. L3 Dec. 2015.

Rebchook, fohn. "David Stevens," YouTube, B Mar,20L1

http://wr/w.americanhanker.com/issues/176 148/stevens-fha-rnba-mortgage-1040796-1.htmI?zkPrintable= 1&nopaginalion=

://w.,,l,u..uSmi.Ot 1s!11

L htrqi ?zkPrintab 1e== 1 &nop a ginati"on-- 1

o On March 10,2011, The Washington Posl reported that "stevens plans to leave his post as

head of the Federal Housing Administration by the end of April."o On March 15,2011, MBA announced that Mr. Stevens had accepted the position of Chief

Executive Officer.3ro Publically available evidence indicates that Mr. Stevens continued to work on GSE-related

matters and other matters affecting his future employer through the end of his government

employment on March 31,2011.

It is also worth noting that, according to the White House Visitors Log, Mr. Stevens met with

executive branch officials at the White House on at least 35 occasions after he departed the federal

government on matters pertaining to the GSEs and housing finance policy. Mr. Stevens met directly

*itn a"ting FHFA Director Edward DeMarco, who had responsibility fo. administering the

conservatorihips of Fannie and Freddie. Further examination of these events will be required in

order to determine the extent to which Mr. Stevens may have violated the 1aw.


Federal ethics law 18 U.S.C. $ 208 prohibits "an executive branch employee from participating

personally and substantially in a particular government matter that will affect his own financial

interests, as well as the financial interests of [an identifiable group of persons] with whom he is

negotiating for or has an arrangement concerning prospective employment."32 Mr. Stevens is subject

to this restriction given his employment in the executive branch from 2009 -2}ll.

In March 2}ll, Mr. Stevens may have violated 18 U.S.C. $ 208 by seeking employment with the

MBA while simultaneously being personally and substantially involved in particular government

matters in which MBA had a direct and real financial interest.

According to OGE, "An employee has a disqualifying financial interest in a particular matter only ifthere is a close causal link between a particular government matter in which the employee

participates and any effect on the asset or other interest (direct effect) and if there is a real possibility

of gain or loss as a result of development in or resolution of that matter (predictable effect). Gain orloss need not be probable. The posiibility of a benefit or detriment must be real, not speculative."33

Additionally, a Jatuary 2010 memorandum by the U.S. Department of Justice ot Restrictions kVhen

:r Mortgage Bankers Association. "MBA Announces Courson to Leave, David H. Stevens to Join MBA in Early

May." 15 Mar.2011.

https : /irvwr,r,.mba. oi'9h73 9 I 4

32 "18 U.S.C. S 208: Acts Affecting a Personal Financial Interest." U.S. Office of Government Ethics.

persa$al-fi nancial-interesti

33 Id.

Seeking Employmenr highlights that "These restrictions can be summarized in one sentence: You

*uy rrJt *oik rimoltutr"o,ruly on a matter affecting a potential employer while seeking a job with the

potlntial employer. The specific rules set forth in 5 CFR 2635.6a4 prohibits an employee from

participating personally and substantially in a particular matter that [he] knows will have an effect on

the financial interests of u prorp"ctive employer with whom [he] is seeking employment."3a

A "particular govemment matter" must focus on a group, and would fail if the "matters focused upon

a large and diverse group."35 In the case of Mr. Stevens, his actions involving parties would not be

deemed diverse under the interpretation of OGE, which treats "industry groups" in a narrowly

defined man rer.'u Given that the MBA is an industry group focused on housing and mortgage

finance matters, it is part of a small and homogenous group of industry associations. Additionally, a.,particular matter" must either _b_e

(i) a particular matter involving specific persons or (ii) particular

matters of general applicability.37

In this instance, MBA consists of a "discrete and identifiable class of persons" and would therefore

be subject to "particular matters of general applicability." For example, if a person worked in the

government regulating train freight shipping, the "discrete and identifiable class of persons" would

be train companies.'* In the caso of Mr. Stevens, he was involved in particular matters pertaining to

the MBA as a discrete and identifiable class.

Mr. Stevens also meets the criteria for "personal and substantial" involvement as he was directly

involved in the "substance of the matter." As the OGE Institute for Ethics in Government has

clarified, even a member of the executive branch who was involved n drafting materials pertaining

to a matter would be deemed to have personal and substantial involvement.3e Thus, any time an

individual is "exercising judgement, making determinations, decisions, or recommendations," they

would be deemed to have substantial involvement.oo O, this basis, there is no doubt that Mr. Stevens

was personally and substantially involved given his intimate and active involvement with particular

matters that had a direct and probable effect on the financial interests of MBA.

34 Summary of the Rules Applicable to a Job Search. N.p.: U.S. Department of Justice. U.S. Department of Justice

3s "lntroduction to 18 U.S.C. 208 (Part 1');' YouTube, YouTube, 11 Sept. 2014.

https ://rvwrv. youtube. cornirvatch'?v:cxZPf)Zb AxY A

36 Id.

37 Id.

38 Id.

3e "lntroduction to 18 U.S.C. 208 [Part 2);' YouTube. YouTube, 11 Sept. 2014.

htEs:ilwwrt.youtube.corr"-rwatch?v:Edche9PyVIlI

40 Id.

Ethics Office, Jan.2010. PDF,

l/r,v ww - iusti ce. stl r, i si

10

. Nature of Possible Violation: Mr. Stevens may have violated 18 U.S.C. $ 208 by participating

in reskicted matters that affected the financial interest of his prospective employer-


o On March 10, 20i I the Washington Post reported that Mr. Stevens planned to "leave FHA by

late April to return to the private sector."4l

o On March 15,20t1, MBA announced that Mr. Stevens had accepted the position as President

and Chief Exeeutive Officer of MBA.o On August l,20ll,American Banker reported that "[W]hile at the FHA, Stevens enjoyed

close social and professional ties with the mortgage industry's main lobby - a group whose

members originaied roughly $300 billion in FHA-guaranteed loans last year.'42

o According to calendar entries, Mr. Stevens continued to attend meetings directly related to

matters in which MBA had a clear and probable financial interest, including but not limited

to, "weekly GSE meeting," "FHFA meeting with Director DeMarco," "meeting w housing

policy council re housing finance," and "weekly housing/housing finance call-"

o ffr" Vtga had financial interests in these matters, as evidenced by their self-description as

"the only association representing al1 segments of the real estate finance industry."a3

Conclusion

While serving in the federal government, Mr. Stevens had personal and substantial involvement in

the formulation and implementation of policies pertaining to Fannie Mae and Freddie Mac. Inseeking private sector employment concurrent with his federal government service, Mr. Stevens had

an obligation to recuse himself from matters in which MBA had or may have had financial interests.

Following his departure from the federal government, Mr. Stevens assumed a private sector position

representing companies with significant financial interests in the mortgage finance industry that

benefit from the elimination of Fannie and Freddie. While representing those companies in the

private sector, Mr. Stevens repeatedly met with senior government officials and transmitted written

materials to federal agencies with responsibility for matters pertaining to the GSEs and housing

a1 Elboghdady, Dina. "FHA Commissioner David Stevens to Head Mortgage Bankers Association." Washington

Posf. The Washington Post, 15 Mar. 2011

:i/v,,*rw-washin tical-econo ir:ner-

head-mortgage-bankers-associationi20 i 1 103/ I 5IAB6TBMX-blog.lrtml

az Horwitz,Jefl and Kate Berry, "MBA Head Cozy with Banks While at FHA." American Banker. Source Media,

Aug. 2011.

httn:ilwsrrv. issuesi 176

1 .html?zkPrintable: 1 &nopagination: 1

a3 "Who We Are." Mortgage Bankers Association. 12Dec. 2015.

https : iA,l,u,w.rn ba. orgrr.vho-rve-are/

1t

a-mba-m

finance policy. These facts merit a prornpt investigation by your offrce to determire the fulIextent to

which Mr. Stevens may have violated 18 U.S.C. $ 207 and 18 U.S.C. $ 208.

Thank you for your attention to this important matter-

Sincerely,

6"m"*LKenneth F. BoehmChairman

Cc: Walter M. Schaub, Jr.DirectorUnited States 0ffrce of Government Ethics

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National Legal andPolicy Centerffif

Board of DirectorsKen Boehm, ChairmanPeter Flaherty, PresidentMichael FalconeKurt ChristensenDavid Wilkinson

Founded 1991

February 29.2016

VIA CERTIFIED MAIL

David A. Montoyalnspector GeneralU.S. Department of Housing and Urban Development451 7'h Street, SWWashington,DC 20410

Re: Investigation of David H. Stevens for Possible Violations of Federal Ethics Laws

Dear Mr. Montoya:

I respectfully request that your office promptly investigate whether David H. Stevens violated 18

U.S.C. $ 201 by engaging in restricted activities while serving as an employee in the executivebranch and after his departure from the federal government, and 18 U.S.C. $ 208 by participatingpersonally and substantially in restricted matters that affected his own financial interests as well as

the financial interests of those for which he had an arrangement concerning prospective employment.

Background

On Decemb er 7,2015, the New York Times published a front page article describing how "a behind-the-scenes effort of Wall Street banks to take over the mortgage market is driven by advocates whoswitch between roles in Washington and the private sector."I The investigation by the Times - as

1 Morgenson, Gretchen. "A Revolving Door Helps Big Banks' Quiet Campaign to Muscle Out Fannie andFreddie." New York Times. The New York Times Company, 07 Dec. 2015.

h ttp:i/www.n],times.comi20 i 5/ 12l07ibusir:ess/a-revolving-rli:r:r-helps-big-banks-quiet-campai gn-to-nruscle-out-fannic*and- I'reddie.h rml? r0

107 Park Washington Oourt. Falls Church, VA. 22046703-237-1 970. fax 703-237-2090. www.nlpc.org

"promoting ethics in public life"

well as a subsequent investigation by Politico - reveals that several former Obama administration

officials, including Mr. Stevens, have engaged in activities that appear to violate numerous federal

ethics laws and regulations.2 Specifically, while serving as Assistant Secretary for Housing and

Commissioner of the Federal Housing Administration ("FHA") at the U.S. Department of Housing

and Urban Development ("HUD") from 20Og - 2011, Mr. Stevens participated personally and

substantially in decisions about mortgage lenders (including the nation's largest banks) and mortgage

insurers, including two publicly traded, shareholder-owned companies - Fannie Mae ("Fannie") and

Freddie Mac ("Fieddiej' and collectively with Fannie, the "GSEs"). After departing the federal

govemment, Mr. Stevens appears to have possibly violated his ban on appearing before the United

States Government about, among other things, matters pertaining specifically to the GSEs by

assisting the nation's largest banks and private mortgage insurers in an effort "to unseat Fannie and

Freddie ... and capture their share of the profits in the country's S5.7 trillion home loan market."3


Federal statutes 18 U.S.C. $ 207(aX1),2A7@)(2), and 207(c) impose certain restrictions on former

senior employees of the executive branch. Regulatory guidance published by the Office ofGovernment Ethics ("OGE") at 5 C.F.R. $ 2641.101 specifies that a "Senior Employee" means any

employee who is "appointed by the President to a position under 3 U.S.C. $ 105(a)(2)(B)."0 On

March 23,2009, President Obama announced his intent to nominate Mr. Stevens, and on July 10,

2009, Mr. Stevens was sworn in as President Obama's appointee, thus rendering him a "Senior

Employee" during his tenure in the executive branch from 2009 - 201 1.5

2 Gerstein, losh. "How Obama Failed to Shut Washington's Revolving Door." Politico.3l Dec. 2015' The

Politico investigation revealed that President Obama's pledge to "shut Washington's revolving door" has

floundered "against the deeply ingrained culture of selling government expertise in Washington" as well as by

"major loopholes and a loss of focus over time." In December 2007 , Abama stated:"The revolving door - the

pattern of people going from industry to agency, back to industry. . . will be closed in the Obama White House.

When I'm President of the United States, if you want to work for my administration, you can't leave my

administration and then go lobby."

3 Morgenson, Gretchen, "A Revolving Door helps Big Banks' Quiet Campaign to Muscle Out Fannie and

Freddie," New York Times. The New York Times Company, 07 Dec' 2015.

ht&:r'rwww.nlrtime$.corn12015i l2l0Tibusinessla-revolvitg-door-helps-big-bankq-quiet-qampaign-to-muscl e-out-fanni e-ancl-freddie.html ?-r:0

a Potts,StephenD."gZX20:LettertoDesignatedAgencyEthicsOfficialDatedJuly23,,tggz."U.S.OfficeofGovernment Ethics ,23luly 1-992.

http:#www'.oge.govlDispla-vTemp-latesiModelSub.aspx?id:2 I 4748 3 7 52

s Wooley, Lemar, "HUD Archives: David Stevens Sworn in as HUD Assistant Secretary for Housing and FHA

Commissioner." U.S. Department of Housing and Urban Developmenr' 15 fuly 2009

ht tp :liarchi ves. hu d. gov,, newsl2 009ipr09- I 20. cfil

ll2lbarack-

OGE guidance states that Section 207 not only "prohibit[s] former officials from communicating orappearing on behalf of persons or entities with respect to matters in which the former officials'personally and substantially participated' during their government service," but Section 207 also"prohibit[s] former officials from 'aid[ing] or advis[ing]'persons or entities on such matters." 6

The most restrictive of these laws is Section 2A7@), which only applies to "Senior Employees" and

lasts for one year following deparhrre from federal service. OGE has emphasized that Section 207(c)prohibits "any communication, on any matter, whether they ever worked on it, [or] was ever pending

in the agency ... a walling off of Senior Employees from communicating back to their formeragencies." T

Notwithstanding Section20T(c), the law explicitly reskicts all civil servants - including Mr. Stevens

- from making representations before an agency of the executive branch on particular matters afterdeparting the federal government.s Specifically, Mr. Stevens is barred from "knowingly mak[ing],with the intent to influence, any communication to or appearance before any officer or employee ofany department, agency, court, of the United States, on behalf of any other person in connection witha particular matter: (a) in which the United States is a parly or has a direct and substantial interest; (b)in which the person participated personally and substantially as such officer or employee; and (c)which involved a specific party or specific parties at the time of such participation."e These

restrictions under 207(a),unlike those of Section 207(c), are not time-limited.

6 Guerra, f oseph R. "Communications Under L8 U.S.C. 5 207." U.S. Department of Justice. 19 July 2001.

i:rttp:,r/ww'w justice.govlsitesidelaultifilesiolo/opinionsl2{101/0113l iop-olc-v02-5-p0059.pdf

7 "Post-Government Employment Restrictions massive Open Online Course (MOOC)." YouTube. OGE Institutefor Ethics in Government,2l July 201,5.

https :/iu,ww.yoritube. comiwatch'iv:n7e0 A82 gh i g

8 Cusich Robert I. "'Particular Matter Involving Specific Parties,''Particular Matter,' and'Matter."' 0ffice ofGovernment Ethics. Office of Government Ethics, 4 October 2006. Web. 6 Dec. 2015. "The definition in LB

U.S.C. S 207(D(3) provides: the term 'particular matter'includes any investigation, application, request for a

ruling or determination, rulemaking, contract, controversy, claim, charge, accusation, arrest, or judicial orother proceeding. This language differs slightly from other references to'particular matter.' However, OGE

does not believe that the absence of such a general catch-all phrase means that the list of enumerated mattersexhausts the meaning of particular matter'under sedion 201,7ti)(3). The list is preceded by the word'includes,'which is generally a term of enlargement rather than limitation and indicates that matters otherthan those enumerated are covered."

e Guerra, foseph R. "Communications Under 18 U.S.C. 5 207." U.S. Department of Justice.19 fuly 2001."Congress responded by eliminating the requirement that a matter be 'pending'or of' direct and substantialinterest'to an agency and by broadening to prohibition to cover'any matter on which such person seeksofficial action.' 1B U.S.C. $ 207[c). In addition, section 207 (c) previously prohibited' any oral or writtencommunication' and barred certain 'appearances' in a separate clause. The majority and dissenting opinionsin Nofziger disputed whether this language created separate offenses with different mens rea requirements.Congress changed the language of section 207{c). which now bars'any communication to or appearancebefore'the agency, to clarify that the mens rea requirement is the same regardless of whether a person makesa 'communication' or'appearance."' United States of America. United States Office of Government Ethics.Compilation of Federal Ethics Laws.

Mr. Stevens is subject to these restrictions because: (i) the United States has a direct and substantial

interest in the GSEs given the ongoing conservatorship administered by the Federal Housing Finance

Agency ("FHFA") and the substantial involvement of the United States Treasury ("Treasury") in

financial and operational matters at Fannie and Freddie; (ii) Mr. Stevens participated personally and

substantially as an employee of the executive branch on GSE and other related housing finance

matters; and (iii) Mr. Stevens was directly involved with matters pertaining to Fannie and Freddie as

specific parties.

The involvement of Mr. Stevens in implementing regulations, crafting policies, and defining rules

that had direct, specific, and material impact on Fannie and Freddie would constitute "substantial

participation" because his involvement was "of significance to the matter."l0 Indeed, in his role at

HUp, Mr. Stevens worked closely with cabinet-level officiats, including the Secretary of Housing

and Urban Development, and regularly communicated his views and influenced decisions that

specifically impacted Fannie and Freddie.ll

While serving at FHA, Mr. Stevens was listed as part of the "government team" working on "The

Future of Housing Finance" and submitted written testimony to Congress demonstrating his personal

and substantial involvement with matters pertaining to Fannie and Freddie: "As Fannie Mae and

Freddie Mac's market presence shrinks, the Administration will coordinate similar reforms at FHA toensure that the private market - not FHA - picks up that new market share ... As we work with the

Federal Housing Finance Agency to pursue increased pricing for guarantees at Fannie Mae and

Freddie Mac, we will also increase the price of FHA mortgage insurance ... Going forward we willcoordinate reforms of Fannie Mae and Freddie Mac with changes at FHA to help ensure the private

market, not FHA, fills the market opportunities created by reform."l2

Moreover, as a HUD proposal on "Credit Risk Retention" reveals, Mr. Stevens was substantiallyinvolved with matters relating to credit risk retention, qualified residential mortgages ("QRM"),Regulation Z, and the Truth in Lending Act ("TILA"), all of which relate to and affect the businesses

of Fannie and Freddie.l3 Further evidence of his personal and substantial involvement in these

http:l/r,vr,,,w.justice.goi,lsitesldetaLrit/filesiolc/opinionsi2U0l /01/3 l/op-olc-v025-p0059. $dfhttp :/iwwrl,. o ge. govlI-A iys-and-Re sulationslst u

10 Id.

11 United States. Cong. House. House Financial Services Committee's Subcommittee on Insurance, Housing,

and Community Opportunity. U.S. Department of Housing and llrban Developmenf. By David H. Stevens' 112th

Congress, 1't session. H Doc. U.S. Department of Housing and Urban Development, L6 Feb. 2011.

http:iifi nancialseri,ices.house. govigredi#pdflO2 I 61 I stevens.pdf

t2 Id.

13 "Credit Risk retention [Proposed Rule]." IJ.S. Securities and Exchange Commission. U.S. Securities and

Exchange Commission, 31 Mar. 2011

httns : i/w'ww. sec. go vlrul esi fi nali 2 0 1 4i 3 4- 7 3 4 0 7.pdf

matters can be drawn from a HUD letter authored by Mr. Stevens titled "Real Estate SettlementProcedures Act (RESPA) and FHA Related Policies."l4 The Real Estate Settlement Procedures Actis "applicable to all federally related mortgage loans" which, among other things, is defined as

"[Loans] made by and intended to be sold by the originating lender or creditor to Fannie Mae."ls Ashis biography indicates, Mr. Stevens was "responsible for overseeing the $600 billion FHA insuranceportfolio and HUD's multifamily subsidized housing program. In addition, he over[saw] HUD'sregulatory responsibilities in the areas of the Real Estate Settlement Proeedures Act, and themanufacfured housing industry."l 6

In March 201t, Mr. Stevens left FHA and joined the Mortgage Bankers Association ("MBA") as

President and Chief Executive Officer where "he is known inside the beltway as a key housinginfluential; serving as an industry authority on major mortgage finance legislative and regulatoryissues."17 Based upon biographical information and public statements provided by Mr. Stevens, it isclear that he participated personally and substantially in decisions affecting Fannie and Freddie.

As evidenced below, the conduct of Mr. Stevens since his departure from the federal governmentappears to constitute textbook and willful violations of 18 U.S.C. $ 207 that should be thoroughlyinvestigated. While there appear tobe over 25 instances in which Mr. Stevens may have violated thelaw, this letter only highlights a few representative examples. A comprehensive list of these possibleviolations is attached as Appendix A.

.@:Mr.Stevensmayhaveviolated18U.S.C.$207bysubmittingaletter to HUD, his former employer, on specific matters within the one-year ban applicable toSenior Employees.


14 Stevens, David H. "Real Estate Settlement Procedures Act (RESPA) and FHA related Policies." U.S.

Department of Housing qnd Urban Development. 30 Dec. 2009.

irttp:l/portal.hud.gov/huclportal/ilocumcnts/hutldoc'lit1:09-53ml.pdf

rs Real Estqte Settlement Procedures Acf. Washington, D.C.: Department of Housing and Urban DevelopmentOffice of Neighborhoods, Voluntary Associations, and Consumer Protection, L979. Board of Governors oftheFederal Reserve System. U.S. Department of Housing and Urban Development. Web. 5 Dec. 20L5.

ht$:irportal.lrurl.gov/hudportalr'HUD?src:i'program:officesihousinginnraires/respaJrrn

16 HUD Archives: David Stevens Sworn In As HUD Assistant Secretary for Housing and FHA Commissioner.U.S. Department of Housing and Urban Development, 15 fuly 2009.

hEp:ilar_chiv_es.hud. govlnews/2009/pr09- 1 20.cfm

17 "David Stevens." Mortgage Bankers Associatian.5 Dec. 2015

htfps ://u,rv!v.mba. orglwho-we-are,rmanagemeqlldavid-steven s

o In August 2011, Mr. Stevens transmitted a

to credit risk retention, a topic in which he

serving at that ugerrcy.ts

letter to HUD seeking to influence matters relatinghad been directly and substantially involved while


HUD, his former employer, on restricted matters by transmitting a letter within the one year ban

applicable to Senior Employees and in violation of the permanent lifetime ban.


On August l,2Ol1, four months after leaving HUD, Mr. Stevens transmitted a letter to HUDin an attempt to influence the agency's position on "credit risk retention."leOn October 24, 2013, Mr. Stevens transmitted a letter to HUD in an attempt to directlyinfluence matters pertaining to "credit risk retention."20

Nature of Possible Violation: Mr. Stevens may have violated 18 U.S.C. 5 207 by influencingthe Consumer Financial Protection Bureau ("CFPB") on restricted matters after departing the

federal government.


On April 6, 2012, Mr. Stevens transmitted an e-mail to the CFPB Director titled "Potential

Impacts of QM."In the e-mail, Mr. Stevens stated: "I wanted to share some personal thoughts with you about

QM in a way that might articulate a few of the key considerations in a less formal buthopefully clear way. I hope this helps to clarify some of the points being discussed. Look, I

18 Stevens, David H. "Re: Credit Risk Retention Proposed Rule." Letter to the Office of the Comptroller of theCurrency, Board ofGovernors ofthe Federal Reserve System, Federal Deposit Insurance Corporation,Securities and Exchange Commission, Federal Housing Finance Agency, Department of Housing and UrbanDevelopment Regulations Division. 1 Aug. 2011.

https :i/wrvw.fcli c. govA"egul ations/l awsifederal/20 1 l i I 1 c224ad74. P D F

1e "Credit Risk Retention Proposed Rule," Mortgage Bankers Association. Federal Deposit InsuranceCorporation, 1 Aug. 2011.

https:/hvrn'i,v,idic.goviregulationsilawsifederali2fll 1i i 1c224ad74.PlF

20 Stevens, David H. "Credit Risk Retention Proposal." Mortgage Bankers Association. Letter to FederalHousing Finance Agency, Department of Housing and Urban Development.24 Oct.201,3.

http:1/wrvw.f.ederalre seive .govlSECRS/ZO13/Novernberi2013 I 1.12lR- 141 liR-141 l:i02413:1 1 1429:5812 i3386453_1.pdf

know I head this MBA, but I am also a 30 year veteran of this industry and someone whospent a couple of years inside working on policy as you both know.21

o The e-mail prompted the CFPB to subsequently document the receipt of ex partecommunication in a formal memorandum.22

Nature of Possible Violation: Mr. Stevens may have violated 18 U.S.C. 5207 by influencingFHFA on reskicted matters after departing the federal government.


While serving in the federal government, Mr. Stevens provided sworn testimony to the HouseFinancial Services Committee on risk-sharing, capital standards, and GSE reform, notingthat: "We will also consider a raflge of reforms, such as risk-sharing with private lenders toreduce the risk to FHA and the taxpayer ... Going forward we will coordinate reforms ofFannie Mae and Freddie Mac with changes at FHA to help ensure the private market, notFHA, fills the market opporfunities created by reform."23On September 15, 2014, Mr. Stevens transmitted a letter to FHFA influencing the agency onrisk-sharing, eligibility standards for mortgage insurers, and GSE reform.2aIn the letter, Mr. Stevens states that: "FHFA should adopt a progrzrm to utilize greater up-front risk-sharing on high LTV loans and coverage on loans with LTVs below 80o%,

accompanied by a reduction in G-fees."25Mr. Stevens also directly influenced FHFA on GSE reform and development of a commonsecurity between Fannie Mae and Freddie Mac, emphasizing that "FHFA Should Direct theGSEs to Move to a Common, Fungible Security."26

21 Stevens, David H. "Potential Impacts of QM." Message to Richard Cordray. 6 Apr. 20L2. E-mail.

http:l/r,vwr,v.re gulations.gov/#!documentDetail:D:CIFFB-201 1 -0(X)8-0304

22 Martinez,Zixta. Memorandum : Email and Attachmentfrom David Stevens (Mortgage bankers Association) toRichard Cordray (CFPB) and Raj Date (CFPB), 6 Apr.201,2.

23 "Written Testimony of David H. Stevens." U.S. Department of Housing and Urban Development. HouseFinancial Services Committee, 1-6 Feb. 20L1.

http:l,ilinancialselvices.l-rouse. govlruedia/pdf7O2 I 6 i I stevens"pdf

24 Stevens, David H^ "FHFA Strategic PIan 2015-19 Response." Letter to Federal Housing Finance AgencyOffice of Budget and Management. 15 Sept. 2014.

httl2s:r'iwwu._rnba.orgiDocuments/rnira.orglf,rlesiCRlFiCRlF'Cor.rncilsiMBALtrtoFFIFAorrStrategicPlan2015- i 9.pdf

2s Id.

26 ld.

According to Fannie Mae, credit risk transfers "allows [Fannie] to share credit risk on [their]guaranfy book of business with private market participants."z1On September 9, 2015, Mr. Stevens transmitted another letter to FHFA influencing theagency on risk-sharing: "FHFA has made substantial efforts to reduce taxpayer exposure torisk by requiring Fannie Mae and Freddie Mac to undertake credit risk transfers. MBA fullysupports this effort and we ask that you consider a meeting with MBA and several of ourlender members to discuss ideas on how to conduct these risk transfers." 28

Nature of Possible Violation: Mr. Stevensrelated to his future employer after receivingfederal government.


violated 18 U.S.C. Q 207 by influencing mattersan offer of employment while still serving in the

Beginning no later than March 6,2011, Mr. Stevens was employed at HUD and in advanceddiscussions for employment with the MBA.On March 6,2011, Mr. Stevens received an offer to serve as President and Chief ExecutiveOfficer of MBA.2e

o On March 8,2A11, Mr. Stevens met with two housing industry groups after receiving theemployment offer from the MBA while still serving as a Senior Employee in the federalgovernment "to discuss new and updated FHA policies and trends affecting them and thesingle family and multifamily housing industry."30

27 "Credit Risk Sharing." Fannie Mae.Fannie Mae,9 Sept.2015.

lrttp:l/fanniemae,con riportall ncling-the-marketi credit-risk/index.html

28 Stevens, David H. Letter to Federal Housing Finance Agency. 30 Nov. 20L5.

http://wrvu,.Lrsmi.orglwp-content/r-rploadstl0l5i1i/Risk-Share-Letter:=l)irectorWattl220i5.pclf

2e Horwitz, Jeff, and Kate Berry. "MBA Head Cozy with Banks While at the FHA." Americqn Banker. SourceMedia, Aug. 2011. Read: Stevens says he was planning to take a job in New York at the time and only receiveda call from the MBA in late February. His calendar lists a dinner with MBA chairman Michael Berman onMarch 2. Stevens received a "last minute" offer four days later, he says."

htlglrylufLan:ericanbairker.comlissuesl'l76:148lstevens-Il-ia-mba-mortgage- 1040796-

1 .htrnl?zkPrintable: 1 &r:opagination: I

30 ld.

FHA Commissioner Stevens Met Colorado Real Estate Professionals/Mortgage Industry. Digital image.Department of Housing and Urban Development, n.d. Web. 13 Dec. 2015.Rebchook, fohn. "David Stevens," YouTube,8 Mar,2011

http://rvro;w.arnoricanbanker.com/issues/17{:14{J/stevens-f}ra-mba-mortgage-1,040796-l".h tml?zkPri n tabl e. 1 &nopagina tion=

o On March 10, 2011, The Washington Post reported that "Stevens plans to leave his post as

head of the Federal Housing Administration by the end of April."o On March 15,z}lt, MBA announced that Mr. Stevens had accepted the position of Chief

Executive Officer.3lo Publically available evidence indicates that Mr. Stevens continued to work on GSE-related

matters and other matters affecting his future employer through the end of his government

employment on March 37,2011.

It is also worth noting that, according to the White House Visitors Log, Mr. Stevens met with

executive branch officials at the White House on at least 35 occasions after he departed the federal

goverlment on matters pertaining to the GSEs and housing finance policy. Additional information

obtained under the Freedom of Information Act also reveals that Mr. Stevens participated in at least

14 other meetings related to the GSEs and housing finance policy after he departed the federal

government. On seven of these occasions, Mr. Stevens met directly with Acting FHFA Director

Edward DeMarco, who had responsibility for administering the conservatorships of Fannie and

Freddie. Further examination of these events will be required in order to determine the extent to

which Mr. Stevens may have violated the law'


Federal ethics law 18 U.S.C. $ 208 prohibits "an executive branch employee from participating

personally and substantially in a particular government matter that will affect his own financial

interests, as well as the financial interests of fan identifiable group of persons] with whom he is

negotiating for or has an arrangement concerning prospective employment."32 Mr. Stevens is subject

to this restriction given his employment in the executive branch from 2009 - 2011.

In March 2}ll, Mr. Stevens may have violated 18 U.S.C. $ 208 by seeking employment with the

MBA while simultaneously being personally and substantially involved in particular government

matters in which MBA had a direct and real financial interest.

According to OGE, "An employee has a disqualifying financial interest in a particular matter only ifthere is a close causal link between a particular government matter in which the employee

participates and any effect on the asset or other interest (direct effect) and ifthere is a real possibilityof gain or loss as a result of development in or resolution of that matter (predictable effect). Gain or

31 Mortgage Bankers Association. "MBA Announces Courson to Leave, David H. Stevens to foin MBA in Early

May." 15 Mar.2011.

https ://wr,vw.mba.orglxT 3 9 i 4

32 "'Lg U.S.C. S 208: Acts Affecting a Personal Financial lnterest." U.S. Office of Government Ethics.

http:l/www.oge.gov/Lalvs-and-Regulations/Statutesi 18-U-S-C--96C29/oA.7-208--Acts-affecting:a:personal- {inaric ia l- i nierciU

loss need not be probable. The possibility of a benefit or detriment must be real, not speculative."s3Additionally, a Janaary 2010 memorandum by the U.S. Department of Justice on Restrictions WhenSeeking Emploltmenr highlights that "These restrictions can be surnmarized in one sentence: Youmay not work simultaneously on a matter affecting a potential employer while seeking a job with thepotential employer. The specific rules set forth in 5 CFR 2635.604 prohibits an employee fromparticipating personally and substantially in a particular matter that [he] knows will have an effect onthe financial interests of a prospective employer with whom [he] is seeking employment."3a

A "particular government matter" must focus on a group, and would fail if the "matters focused upona large and diverse group."3s In the case of Mr. Stevens, his actions involving parties would not bedeemed diverse under the interpretation of OGE, which treats "industry groups" in a narrowlydefined manner.36 Given that the MBA is an industry group focused on housing and mortgagefinance matters, it is part of a small and homogenous group of industry associations. Additionally, a"particular matter" must either be (i) a particular matter involving specific persons or (ii) particularmatters of general applicability.3T

In this instance, MBA consists of a "discrete and identifiable class of persons" and would thereforebe subject to "particular matters of general applicability." For example, if a person worked in thegovernment regulating train freight shipping, the "discrete and identifiable class of persons" wouldbe train companies.3s In the case of Mr. Stevens, he was involved in particular matters pertaining tothe MBA as a discrete and identifiable class.

Mr. Stevens also meets the criteria for "personal and substantial" involvement as he was directlyinvolved in the "substance of the matter." As the OGE Institute for Ethics in Government hasclariflred, even a member of the executive branch who was involved in drafting materials pertainingto a matter would be deemed to have personal and substantial involvement.3e Thus, any time anindividual is "exercising judgement, making determinations, decisions, or recommendations," theywould be deemed to have substantial involvement.a0 On this basis, there is no doubt that Mr. Stevens

33 Id.

3a Summary of the Rules Applicable to a Job Search. N.p.: U.S. Department of Justice. U.S. Department of JusticeEthics Office, Jan. 2010. PDF.

http:ilwr,vrv justice.govisites/clefariltlfilesrjmd/legac/2014i08/23lpostemplsurn.pdf

3s "lntroduction to 18 U.S.C. 208 fPart 1)." YouTube, YouTube, 11 Sept. 2014.

htEs :/irvrvr,v.youtube. comir,l,atch?v:cxZPDZ bAx YA

36 Id.

37 Id.

38 Id.

3e "lntroduction to 18 U.S.C. 208 (Part 2)." YouTube. YouTube, 1,1, Sept 2014.

https :iiwwrv.]roritube.corn/rvatch'/v:Edche9P),V B I

+0 Id.

l0

was personally and substantially involved given his intimate and active involvement with particularmatters that had a direct and probable effect on the financial interests of MBA.

. Nature of Possible Violation: Mr. Stevens may have violated 18 U.S.C. $ 208 by participating

in restricted matters that affected the financial interest of his prospeetive employer.


o On March 10, 201 | the lYashington Post reported that Mr. Stevens planned to "leave FHA bylate April to return to the private sector."4l

o On March 15,2011, MBA announced that Mr. Stevens had accepted the position as Presidentand Chief Executive Officer of MBA.

o On August l, 2011, American Banker reported that "[W]hile at the FHA, Stevens enjoyed

close social and professional ties with the mortgage industry's main lobby --a group whosemembers originaied roughly $300 billion in FHA-guaranteed loans lastyear.'42

o According to calendar entries, Mr. Stevens continued to attend meetings directly related tomatters in which MBA had a clear and probable financial interest, including but not limitedto, "weekly GSE meeting," "FHFA meeting with Director DeMarco," "meeting w housingpolicy council re housing finance," and "weekly housinglhousing finance call."

o The MBA had financial interests in these matters, as evidenced by their self-description as

"the only association representing all segments of the real estate finance industry."a3

Conclusion

While serving in the federal government, Mr. Stevens had personal and substantial involvement inthe formulation and implementation of policies pertaining to Fannie Mae and Freddie Mac. Inseeking private sector employment concurrent with his federal government service, Mr. Stevens hadan obligation to recuse himself from matters in which MBA had or may have had financial interests.Following his departure from the federal government, Mr. Stevens assumed a private sector positionrepresenting companies with significant financial interests in the martgage finance industry that

a1 Elboghdady, Dina. "FHA Commissioner David Stevens to Head Mortgage Bankers Association." WashingtonPost The Washington Post, 15 Mar. 2011

https:iiw,ww.rvashingtonpost.com/blogs/po1itic,al-econornyipostliha-comnrissioner-david-stevens-to-head-rnorrgage-bankers-associationi20 1 1 /031 I 5iAB6'IBMX-blog.html

az Horwitz,Jeff, and Kate Berry, "MBA Head Cozy with Banks While at FHA." American Banker. Source Media,Aug.2011.

http:,'iw'u,w.ariericanbanker.cornlissuesl l.T6:i4Slstevens-fha-mba*mofigage- 1040796-

1 .html?zkPrintable: I &nopag_inatign-- I

a3 "Who WeAre." Mortgage Bankers Association. L2Dec. 2015.

https :li."vranv,rnba. olgl'who-we-qIe/

11

benefit from ttre elimination of Fannio and Fieddie. While representing those eompsnies in the

private sector, Mr. Stevens repeatedly met with senior government offrcials ard transmified written

materials to federal agencies with responsibility fer matters psrhinmg to the GSEs and housing

finance polioy. These facts merit a pmmpt investigation by your office to determine the fu1l entent to

which Mr" Steveos may have violstsd 18 U.S.C. $ 207 and 18 U.S.C- $ 208"

Tharrk you foryour attention to this important matter.

Sincerely,

Cc:

frG_LKenneth F. BoehmChainnan

HetenM. AlbertDeputy Inspoeto: GeneratU.S. Departrreat of Housing and Urban Developrnmt

t2