Freddie Mac CEO Michael DeVito will be retiring during the first quarter of 2024, after a nearly three-year tenure during which the government-sponsored enterprise built up capital but failed to get much closer to an end to conservatorship.
The enterprise will conduct a search for a successor, but its statement had no further details about that quest or why DeVito decided to exit at this time.
“We are very saddened to hear of Michael’s departure, and the board expresses its profound appreciation for his strong leadership and his many other contributions to Freddie Mac,” said Sara Mathew, chairperson, in the statement. “Above all, Michael demonstrated a true passion for the company’s mission and drove meaningful progress in making home possible for homebuyers and renters in communities across the nation.”
The Community Home Lenders of America found DeVito to be receptive to the needs of its constituency, the small and mid-sized independent mortgage banker, said Scott Olson, executive director in an interview.
“He and his team were responsive in listening to concerns and took them seriously,” including recent issues with agency repurchases by sellers, Olson continued.
In his successor, CHLA is looking for a continuation of that willingness to engage with the small and mid-sized community, said Olson.
Sandra Thompson, the director of the Federal Housing Finance Agency, indicated the regulator will be a part of the process, an indication of the politicized role the job has as the 15th anniversary of Freddie Mac and Fannie Mae being placed into conservatorship was on Sept. 7.
”I will work closely with the board in identifying a successor and ensuring a smooth transition to the new leadership,” a statement attributed to Thompson declared.
”Michael DeVito has brought more than 30 years of experience and leadership in mortgage finance to Freddie Mac. I am grateful for his commitment and dedication which has put the company in a stronger financial position while still providing broad access to credit for all creditworthy borrowers,” Thompson said.
If anything, a turnover in key leadership positions has been underway both at Freddie Mac and Fannie Mae and that could be in part because of the duration of the conservatorship.
Olson noted that CHLA, as well as its two predecessor organizations, have held the position that the conservatorships can be resolved through actions of the FHFA director, creating a utility model for the GSEs “that to a certain degree continues the policies and perspective that we have, but that we have some clear guidance about how they’ll be operated going forward.” The model needs to balance safety and soundness with meeting credit needs.
Another reason for a speedy resolution is that the FHFA director’s job is now filled at the will of the president following a June 2021 U.S. Supreme Court ruling. If the White House changes hands, it is likely a new FHFA head with different priorities and policies will be appointed, said Olson.
“It is an ongoing concern about the ability to have a long-term commitment from executives at both Fannie and Freddie in light of the fact that there doesn’t seem to be any light at the end of the tunnel” for the end of the conservatorship, said Olson.
DeVito’s tenure started in June 2021, shortly after changes to the Preferred Stock Purchase Agreements with the U.S. Treasury ended the net worth sweep. Investors in both companies recently won a lawsuit that challenged the sweep.
His success can be measured in terms of how much net worth grew from retained earnings during that time frame. At the end of the second quarter of 2021, Freddie Mac had $22.4 billion of capital that could be counted towards ending the conservatorship. As of June 30, that grew to $42 billion.
Total capital requirements, as established by the Federal Housing Finance Agency and can change quarterly, were $125 billion according to a calculation from Keefe, Bruyette & Woods.
As the rules are currently structured, it would take nearly 10 years for Freddie Mac (as well as Fannie Mae for that matter) to have enough capital to exit conservatorship, KBW said.
Before joining Freddie Mac, DeVito was a long-time executive at Wells Fargo, who rose to interim head of the home lending business in November 2017 following Franklin Codel’s firing for cause.
In January 2018, DeVito was named to the position on a full-time basis. He retired from Wells Fargo in July 2020 after 23 years with the bank, and was replaced by Kristy Fercho.
When DeVito took the Freddie Mac job, he replaced former Prudential Vice Chairman Mark Grier, the interim CEO since March 2021. Before DeVito, the last permanent CEO at Freddie Mac was David Brickman, who held the job for a little over two years until he resigned effective in January 2021.
