Talking Heads: Brian Montgomery, The Collingwood Group & Former FHA Commissioner

10 min read

Inside HUD during transition 

Imagine the confusion if the bosses of the company you worked for changed every four to eight years, while most of the rest of the staff remained. That’s exactly what happens at cabinet-level departments, including the Department of Housing and Urban Development, when there is an administration change.

On January 24, 2017, Dr. Ben Carson was unanimously confirmed by the Senate Banking Committee as the next Secretary of Housing and Urban Development and awaits approval by the full Senate. As Tax Credit Advisor went to press, President Donald Trump had not yet nominated his assistant secretaries, including the Assistant Secretary for Housing/Federal Housing Commissioner.

To get some insight into the transition process and how it impacts those involved, TCA reached out to Brian Montgomery, who served as FHA Commissioner from 2005 to 2009, during President George W. Bush’s second term and the first six months of the Obama Administration. Montgomery served as communications director at the Texas Department of Housing and Community Affairs for three years when he joined the Bush for President campaign in May 1999. He would later serve as a deputy assistant to the president and contribute ideas on a wide range of issues, including the administration’s efforts to boost homeownership, increase access to affordable housing and reform both the Real Estate Settlement Procedures Act and the government sponsored enterprises.

Today, Montgomery is vice chairman of The Collingwood Group, a business consulting firm he co-founded in 2009 after leaving HUD that identifies and secures business opportunities with the federal government and the GSEs; helps financial services companies comply with, interpret and operate effectively within the ever-changing regulatory environment; and works directly with CEOs and boards of directors to help increase market share and profitability.

Tax Credit Advisor: Besides the HUD Secretary and the FHA Commissioner, how many people coming to work at HUD must be confirmed by the Senate and how many are career staff?

Montgomery: The vast majority of political appointees, maybe 75 people, do not have to be confirmed by the Senate. That’s throughout HUD, not just in the Office of Housing, which I oversaw. These individuals are classified as Schedule C Appointments, which means their duration at HUD lasts as long as the president’s term. It’s generally the assistant secretaries who must be confirmed. This includes the Assistant Secretaries for Community Planning and Development, Public and Indian Housing and Policy Development and Research, in addition to the General Counsel, the Chief Financial Officer and Ginnie Mae President. Previously, the Assistant Secretaries for Governmental Relations and Communications/Public Affairs used to be confirmed by the Senate, but Congress passed a law several years ago which discontinued that policy. In terms of career staff, the Office of Housing employs about 3,000 people.

TCA: How does the senior leadership and staff work together?

Montgomery: Working in the federal government, no matter whether it’s the Department of Labor or the Department of Commerce, or in my case HUD, there’s this interesting dynamic: when one president’s term ends, another president’s term begins, and the executive leadership changes. Nowhere else in America does this happen. If you’re a career staff person, you know this comes every four years, sometimes eight years.  Even when a president is reelected, many times there is still a change in the leadership structure. By the same token, if you’re a political appointee coming into HUD, there’s a whole team of career folks who’ve worked there for five, ten, 15, 20, sometimes 40 years. Let’s say you worked for a non-profit or a mortgage lender, or maybe you were an affordable housing developer. You may know FHA’s programs, but not necessarily how they work within the Department. From my experience, the synergy between the political staff and the career staff is extremely important and necessary for a successful relationship.

TCA: How does new management, many without prior experience working at HUD, lead individuals who know the FHA programs best?

Montgomery: You have to, and should, embrace the career staff as you would political appointees, because they more than likely have tried and seen everything that you’re thinking about when coming into an agency, especially the deputy assistant secretaries who’ve been there for decades. Making them part of the team, as trusted advisors, increases your odds for success. When I came to HUD, I came from the White House, where we had senior staff meetings every morning at 7:30 am in the Roosevelt Room. After I got confirmed, I started doing the same thing. It dawned on me the first day that a lot of the deputy assistant secretaries didn’t really know one another. Multifamily staff didn’t know the people running regulatory affairs, or manufactured housing or healthcare facilities. It became obvious to me that communication between the political appointees and career staff was essential. When I counsel someone who is going to work at HUD, I tell that person to have an open mind and to recognize that career staff want the same thing they do because they believe in HUD’s mission.

TCA: How does in-house politics affect the Department?

Montgomery: If you recall back in 2005, FHA’s market share was almost nonexistent. The typical FHA borrower was being steered into high-cost subprime loans, many with teaser rates, and the result was that FHA’s share of the mortgage market shrunk to about two percent. When I got to FHA, the people who were most upset about that were the career staff. They said, “Our traditional borrowers are being taken advantage of. It’s not right.” I made FHA reform the centerpiece of what I wanted to achieve during my time there to get FHA back into the game. We succeeded because of the collaboration and communication between the secretary, assistant secretaries and career staff.

TCA: Was communication the key to maintaining loyalty and good morale within FHA?

Montgomery: I never woke up in the morning and asked myself how I was going to build morale that day. If people feel like they’re being listened to, included in discussions and feel free to object without fearing repercussions, it’s amazing how that in and of itself makes them feel like they’re part of the team. I wasn’t a perfect manager, nobody is, but I think my style, my model, worked. It’s not rocket science. Listen to people. Respect them. And consider their opinions. That’s the best way to build morale.

TCA: Did your time at the Texas Department of Housing help prepare you for being FHA Commissioner?

Montgomery: The management styles were similar. The Texas Department of Housing was at the time, and probably still is, one of the largest housing finance agencies in the country. We had a broad reach and served a vital role. Between the HOME program, Community Development Block Grants, energy efficiency programs, tax credits and first-time homebuyers, it was a proving ground for HUD. I don’t think I ever mentioned this in an interview before, but the position at HUD that I really wanted was Assistant Secretary for Community Planning and Development. When I left the White House that position was not open. The only available job was FHA Commissioner. The personnel staff at the White House asked me if I’d consider FHA Commissioner and I said ‘sure.’

TCA: Describe the relationship between the FHA Commissioner and the HUD Secretary. Do you work in unison? Is the culture based on the will of the secretary?

Montgomery: As I noted before, we knew something wasn’t right with the housing finance market based on FHA’s dwindling market share. Our day-to-day job was focused on rebuilding single-family programs, because multifamily was humming along. So it was easy to get the secretary and the White House to focus on FHA reform and supporting our efforts to create flexibility with loan limits and pricing and modernizing the Real Estate Settlement Procedures Act (RESPA), which at that time still fell under the jurisdiction of HUD. However, it was Hurricane Katrina that got us all rowing in the same direction. All of the assistant secretaries at HUD were involved in the cleanup effort. It was a site to behold to see everyone laser-focused on helping rebuild Louisiana and Mississippi. The relief effort was massive, impacting many federal agencies. HUD was there to help provide temporary housing for displaced residents. But damaged schools and hospitals had to be rebuilt. Small businesses needed assistance. Damaged crops needed to be disposed of. I digress, but the point is you can never predict the future and what the priorities will be at HUD or NASA or the Department of Labor. After Fannie Mae and Freddie Mac went into conservatorship, FHA shouldered a tremendous workload pumping liquidity into the housing market. I think we did a good job and I’d also credit my successor David Stevens. Regardless of politics, we worked toward the same goals.

TCA: Did you have the autonomy to run FHA as you saw fit, or did you take instructions from the HUD Secretary? 

Montgomery: I had a strong relationship with the White House. I knew that we could have professional, well-reasoned discussions about policy issues, such as reforming FHA. Alphonso Jackson, the secretary, was part of those discussions, but he was running all of HUD. He had to worry about everything, whether it was public and Indian housing, budgets, or personnel, so any HUD Secretary, whether it’s Alphonso Jackson or Henry Cisneros or Shaun Donovan, has to delegate a fair amount of his authority to the assistant secretaries, which is why they are there. That’s why staff meetings become important and communication between all of the assistant secretaries is essential. But yes, all assistant secretaries reported to the HUD Secretary.

TCA: What guidance have you provided to the Trump transition team? Do you anticipate that the nominee for FHA Commissioner will be supportive of FHA and its loan programs?

Montgomery: I wasn’t officially on the transition team, but Meg Burns (former Director of FHA’s Office of Single Family Program Development) and I met with Dr. Carson a couple of times. Separately, the transition team asked me to provide a list of candidates for high-level positions at HUD and not just within FHA. The people who I recommended very much support HUD, FHA and its mission. Going forward, and I understand that this administration is just getting started, but I hope there will be greater collaborative discussions on the roles of FHA, VA, USDA, the government-sponsored enterprises and private mortgage insurers.

TCA: There is a lot of concern among affordable housing professionals around tax reform and the future of the Low Income Housing Tax Credit program. Can you provide any reassurance that LIHTC will be protected and embraced by the Trump Administration?

Montgomery: It’s still way too early to respond to that question with any specificity or certainty but from what I’ve read and from what Treasury Secretary Mnuchin has said, the administration’s goal is to achieve three to four percent economic growth. One of the ways to get there is through tax reform. Secretary Mnuchin said we should reduce the corporate tax rate from 35 percent to 20 or 15 percent. Since then, we’ve seen a drop in tax credit investor yields and any further change to the tax code may further dampen investor participation in the tax credit program, meaning other programs might prove more attractive. We could see a further reduction in tax credit pricing, and if interest rates go up, that could create some gaps in financing affordable housing. But this is all speculation. Luckily, the tax credit program enjoys support from the vast majority of Democrats and Republicans. If changes are made to the tax code, I for one would state unequivocally that we need to support successful affordable housing programs, like the Low Income Housing Tax Credit.

Darryl Hicks is vice president, communications for the National Reverse Mortgage Lenders Association and a 24-year veteran of associations managed by Dworbell, Inc., the management company of NH&RA.