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Board of Directors

Ken Boehm, Chairman


Peter Flaherty, President
Michael Falcone
Kurt Christensen
David Wilkinson

"promoting ethics in public life"

Founded 1991

February 29,2016

VIA CERTIFIED MAIL


Channing D. Phillips

United States Attorney


Office of the United States Attorney
555 4'h Street, NW
Washington, 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 executive
branch and after his departure from the federal government, and 18 U.S.C. $ 208 by participating
personally 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 behindthe-scenes effort of Wa1l Street banks to take over the mortgage market is driven by advocates who
switch 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 and
Freddie." 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-campaignrtornLrscle- ou

t-lannie-and-lieddie.htmlLr:0

Court. Falls Church, VA. 22046


703-237-l 970. fax 703-237-2090. www.nlpc.org

107 Park Washington

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 of
Government 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."

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-tomuscle-out-fannie-and-freddi e.html'?-r:0


a Potts,StephenD."gZX20rLettertoDesignatedAgencyEthicsOfficialDatedJuly23,,!99Z."U.S.Officeof
Government Ethics ,23 July 1992.
http:liryrn w.oge. gr:v/DisplalzTeruplatesiModelSub.aspx?id:2

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
allso
'personally and substantially participated' during their government service," but Section 2A7
6
matters."
such
entities
on
or
'aid[ing]
or
advisfing]'persons
from
'prohibit[s] former officials
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
7
agencies."
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 of
any department, agency, court, of the United States, on behalf of any other person in connection with
a 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'

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

"Post-Government Employment Restrictions massive Open Online Course [MOOC)." YouTube. OGE Institute

for Ethics in Government,2Lluly 201'5.

https;liu,

Cusick, Robert L "'Particular Matter Involving Specific Parties,' 'Particular Matter,' and'Matter."' Office of
Government 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 or
other 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 other
than 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 written
communication'and barred certain'appearances'in a separate clause. The maiority and dissenting opinions
in 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 appearance
before' 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 will
coordinate 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."


Exchange Commission, 3'L Mar.

IJ.S.

Securities and Exchange Commissian U.S. Securities and

20ll

htQs :1iwww. sec. govlniies/finali20

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's
regulatory responsibilities in the areas of the Real Estate Settlement Procedures Act, and the
6
manufactured housing industry."l
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 is
clear that he participated personally and substantially in decisions affecting Fannie and Freddie.

In March

2}ll, Mr. Stevens left FHA and joined

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

lrttp :l/portal.hud. gov/hudportalldocumentslhucldoc'lici:09

-5

U'S.

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

http :iiarchives.hud. govrnei.r,si2009ipr09-

tz

20.

Iuly 2009'

cfm

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

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

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
8
serving at thatugency.
1

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 ban
applicable to Senior Employees and in violation of the permanent lifetime ban.
Details of Possible Violation:

o
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
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.

Details of Possible Violation:

o
o

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

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.pdf

r112tR-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
ffr" e-mail prompted the CFPB to subsequently document the receipt of ex parte
communication in a formal memorandum.22

Nature of Possible Violation: Mr. Stevens may have violated 18 U.S.C. $ 207 by influencing
FHFA on restricted matters after departing the federal government.
Details of Possible Violation:

o
o
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 of
Fannie Mae and Freddie Mac with changes at FHA to help snsure the private market, not
FHA, fills the market opportunities created by reform."23
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
In the letter, Mr. Stevens states that: "FHFA should adopt a program to utilize greater upfront risk-sharing on high LTV loans and coverage on loans with LTVs below 80%,
accompanied by a reduction in G-fees."2s
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 HousingFinanceAgency


Office of Budget and Management. 15 Sept. 2014.

https:i/www.rnba.o:gr'Documents/mba.orglfiles/CREFiClREFCouncilsiMBALtrtoFHFAonStrategicPl
an2015-19.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 fully
supports this effort and we ask that you consider a meeting with MBA and several of our
28
lender members to discuss ideas on how to conduct these risk transfers."

Nature of Possible Violation: Mr. Stevens violated 18 U.S.C. 5 207 by influencing matters
related to his future employer after receivrng an offer of employment while still serving in the
federal government.

Details of Possible Violation:

o
o
o

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

1s!11

://w.,,l,u..uSmi.Ot

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
L htrqi ?zkPrintab

issues/1 7
1e== 1

&nop a ginati"on--

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
1.htmI?zkPrintable= 1&nopaginalion=

148/stevens-fha-rnba-mortgage-1040796-

o
o
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."
On March 15,2011, MBA announced that Mr. Stevens had accepted the position of Chief
Executive Officer.3r
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.

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.

It is also worth noting that, according to the White

Matters Relating to 18 U.S.C. S 208


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 if
there 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 or
loss 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


May." 15 Mar.2011.

H. Stevens to Join MBA

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


:

32 "18 U.S.C. S 208: Acts Affecting a Personal Financial

persa$al-fi nancial-interesti
33 Id.

Interest."

U.S. Office

of Government Ethics.

in Early

You
Seeking Employmenr highlights that "These restrictions can be summarized in one sentence:
job
with the
*uy rrJt *oik rimoltutr"o,ruly on a matter affecting a potential employer while seeking a

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

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.

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

Mr.

Stevens also meets the criteria

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

Ethics Office, Jan.2010.


l/r,v ww - iusti ce. stl
3s

Job Search. N.p.: U.S. Department of Justice. U.S. Department of Justice

PDF,
r, i

si

"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.

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-

Details of Possible Violation:

o
o
o
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
On March 15,20t1, MBA announced that Mr. Stevens had accepted the position as President
and Chief Exeeutive Officer of MBA.
On August l,20ll,American Banker reported that "[W]hile at the FHA, Stevens enjoyed
a group whose
close social and professional ties with the mortgage industry's main lobby
year.'42
last
loans
in
FHA-guaranteed
members originaied roughly $300 billion
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-"
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. In
seeking 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

tical-econo
:i/v,,*rw-washin
i
1
103/
I 5IAB6TBMX-blog.lrtml
head-mortgage-bankers-associationi20

ir:ner-

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

httn:ilwsrrv.
1 .html?zkPrintable:
a3 "Who We

issuesi 176
1

&nopagination:

a-mba-m

Are." Mortgage Bankers Association. 12Dec. 2015.

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


:

1t

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.
finance

Thank you for your attention to this important matter-

Sincerely,

6"m"*L
Kenneth F. Boehm
Chairman

Cc:

Walter M. Schaub, Jr.


Director
United States 0ffrce of Government Ethics

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National Legal and


Policy

Centerffif

"promoting ethics in public life"

Board of Directors
Ken Boehm, Chairman
Peter Flaherty, President
Michael Falcone
Kurt Christensen
David Wilkinson

Founded 1991

February 29.2016

VIA CERTIFIED MAIL


David A. Montoya
lnspector General
U.S. Department of Housing and Urban Development
451 7'h Street, SW
Washington,DC 20410

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

Dear Mr. Montoya:

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 executive
branch and after his departure from the federal government, and 18 U.S.C. $ 208 by participating
personally 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 behindthe-scenes effort of Wall Street banks to take over the mortgage market is driven by advocates who
switch between roles in Washington and the private sector."I The investigation by the Times - as

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

107 Park Washington Oourt. Falls Church, VA. 22046


703-237-1 970. fax 703-237-2090. www.nlpc.org

gn-to-

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

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


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 of
Government 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."

ll2lbarack-

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-tomuscl e-out-fanni e-ancl-freddie.html ?-r:0


a Potts,StephenD."gZX20:LettertoDesignatedAgencyEthicsOfficialDatedJuly23,,tggz."U.S.Officeof
Government Ethics

,23luly

1-992.

http:#www'.oge.govlDispla-vTemp-latesiModelSub.aspx?id:2

4748

37

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

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 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 former
T
agencies."
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 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 of
any department, agency, court, of the United States, on behalf of any other person in connection with
a 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.

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

"Post-Government Employment Restrictions massive Open Online Course (MOOC)." YouTube. OGE Institute

for Ethics in Government,2l July

201,5.

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

Cusich Robert I. "'Particular Matter Involving Specific Parties,''Particular Matter,' and'Matter."' 0ffice of
Government 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 or
other 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 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 other
than 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 substantial
interest'to an agency and by broadening to prohibition to cover'any matter on which such person seeks
official action.' 1B U.S.C. $ 207[c). In addition, section 207 (c) previously prohibited' any oral or written
communication' and barred certain 'appearances' in a separate clause. The majority and dissenting opinions
in 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 appearance
before'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.

(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

Mr. Stevens is subject to these restrictions

because:

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 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 will
coordinate 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 substantially
involved 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
http :/iwwrl,. o ge. govlI-A iys-and-Re sulationslst u

/01/3 l/op-olc-v025-p0059. $df

10 Id.
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.
11

http:iifi nancialseri,ices.house. govigredi#pdflO2

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-

7340

7.pdf

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."ls 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's
regulatory responsibilities in the areas of the Real Estate Settlement Proeedures Act, and the
6
manufacfured housing industry."l

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 housing
influential; serving as an industry authority on major mortgage finance legislative and regulatory
issues."17 Based upon biographical information and public statements provided by Mr. Stevens, it is
clear 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 government
appears to constitute textbook and willful violations of 18 U.S.C. $ 207 that should be thoroughly
investigated. While there appear tobe 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.

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

Details of Possible Violation:

14 Stevens, David H. "Real Estate Settlement Procedures Act (RESPA) and FHA related Policies."
Department of Housing qnd Urban Development. 30 Dec. 2009.

U.S.

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 Development
Office of Neighborhoods, Voluntary Associations, and Consumer Protection, L979. Board of Governors ofthe
Federal 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.
Department of Housing and Urban Development, 15 fuly 2009.

U.S.

hEp:ilar_chiv_es.hud. govlnews/2009/pr09-

20.cfm

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


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

In August 2011, Mr. Stevens transmitted 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 that ugerrcy.ts

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 ban
applicable to Senior Employees and in violation of the permanent lifetime ban.
Details of Possible Violation:
On August l,2Ol1, 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
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.

Details of Possible Violation:


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 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 ofGovernors 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.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 Insurance
Corporation, 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 Federal
Housing 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
141

l:i02413:1 1 1429:5812 i3386453_1.pdf

liR-

head this MBA, but I am also a 30 year veteran of this industry and someone who
spent a couple of years inside working on policy as you both know.21
The e-mail prompted the CFPB to subsequently document the receipt of ex parte

know

communication in a formal memorandum.22

Nature of Possible Violation: Mr. Stevens may have violated 18 U.S.C. 5207 by influencing
FHFA on reskicted matters after departing the federal government.
Details of Possible Violation:
While serving in the federal government, 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 raflge of reforms, such as risk-sharing with private lenders to
reduce the risk to FHA and the taxpayer ... Going forward we will coordinate reforms of
Fannie Mae and Freddie Mac with changes at FHA to help ensure the private market, not
FHA, fills the market opporfunities created by reform."23
On September 15, 2014, Mr. Stevens transmitted a letter to FHFA influencing the agency on
risk-sharing, eligibility standards for mortgage insurers, and GSE reform.2a
In the letter, Mr. Stevens states that: "FHFA should adopt a progrzrm to utilize greater upfront risk-sharing on high LTV loans and coverage on loans with LTVs below 80o%,
accompanied by a reduction in G-fees."25
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. 20L2. E-mail.
http:l/r,vwr,v.re gulations.gov/#!documentDetail:D:CIFFB-201

22 Martinez,Zixta. Memorandum : Email and

-0(X)8-0304

Attachmentfrom David Stevens (Mortgage bankers Association) to

Richard Cordray (CFPB) and Raj Date (CFPB), 6 Apr.201,2.

23 "Written Testimony of David H. Stevens."


Financial Services Committee, 1-6 Feb. 20L1.

U.S.

Department of Housing and Urban Development. House

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 Agency
Office of Budget and Management. 15 Sept. 2014.

httl2s:r'iwwu._rnba.orgiDocuments/rnira.orglf,rlesiCRlFiCRlF'Cor.rncilsiMBALtrtoFFIFAorrStrategicPl
an2015- 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."z1
On September 9, 2015, Mr. Stevens transmitted another letter to FHFA influencing the
agency on risk-sharing: "FHFA has made substantial efforts to reduce taxpayer exposure to
risk by requiring Fannie Mae and Freddie Mac to undertake credit risk transfers. MBA fully
supports this effort and we ask that you consider a meeting with MBA and several of our
28
lender members to discuss ideas on how to conduct these risk transfers."

Nature of Possible Violation: Mr. Stevens violated 18 U.S.C. Q 207 by influencing matters
related to his future employer after receiving an offer of employment while still serving in the
federal government.

Details of Possible Violation:

Beginning no later than March 6,2011, Mr. Stevens was employed at HUD and in advanced
discussions for employment with the MBA.
On March 6,2011, Mr. Stevens received an offer to serve as President and Chief Executive
Officer of MBA.2e
On March 8,2A11, 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
single 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. Source
Media, Aug. 2011. Read: Stevens says he was planning to take a job 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."

htlglrylufLan:ericanbairker.comlissuesl'l76:148lstevens-Il-ia-mba-mortgage- 10407961 .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-1,040796l".h tml?zkPri n tabl e. 1 &nopagina tion=

o
o
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."
On March 15,z}lt, MBA announced that Mr. Stevens had accepted the position of Chief
Executive Officer.3l
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.

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'

It is also worth

Matters Relating to 18 U.S.C. S 208


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 if
there 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 possibility
of 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."s3
Additionally, a Janaary 2010 memorandum by the U.S. Department of Justice on Restrictions When
Seeking Emploltmenr highlights that "These restrictions can be surnmarized in one sentence: You
may not work simultaneously on a matter affecting a potential employer while seeking a job with the
potential employer. The specific rules set forth in 5 CFR 2635.604 prohibits an employee from
participating personally and substantially in a particular matter that [he] knows will have an effect on
the 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 upon
a large and diverse group."3s 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 manner.36 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 be (i) a particular matter involving specific persons or (ii) particular
matters of general applicability.3T

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.3s In the case 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
clariflred, even a member of the executive branch who was involved in 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.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 Justice
Ethics 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,

https :iiwwrv.]roritube.corn/rvatch'/v:Edche9P),V
+0

1,1,

Sept 2014.

Id.

l0

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.

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.

Details of Possible Violation:

o
o

On March 10, 201 | the lYashington Post reported that Mr. Stevens planned to "leave FHA by
late April to return to the private sector."4l
On March 15,2011, MBA announced that Mr. Stevens had accepted the position as President
and Chief Executive Officer of MBA.

o
o

l, 2011, American Banker reported that "[W]hile at the FHA, Stevens enjoyed
group whose
close social and professional ties with the mortgage industry's main lobby
--a
loans
lastyear.'42
FHA-guaranteed
billion
in
roughly
members originaied
$300
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 housinglhousing finance call."
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
On August

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. In
seeking 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 martgage finance industry that

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

https:iiw,ww.rvashingtonpost.com/blogs/po1itic,al-econornyipostliha-comnrissioner-david-stevens-tohead-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- 10407961

.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,

frG_L
Kenneth F. Boehm
Chainnan

Cc:

HetenM. Albert
Deputy Inspoeto: Generat
U.S. Departrreat of Housing and Urban Developrnmt

t2

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