Daniel Mudd on Foreclosure

This past February Daniel Mudd, the recently ousted president of the Federal National Mortgage Association ("Fannie Mae"), gave a speech to the National Association of Homebuilders in which he laid out plans to "weather the housing market crisis" (see below and the following three pages). Mudd told homebuilders that Fannie Mae's "prudent steps" to keep the mortgage market "stable, liquid and affordable" included "cutting our dividend" to investors (see Page 3). Mudd didn't mention his own sacrifices (according to the Washington Post, one month earlier the board had stopped paying his $100,000-per-year country club dues), but he predicted that the increase in defaults and foreclosures would take "at least another tough year to get through" (see Page 4).

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Mudd explained that although the goal was "avoiding foreclosure at all costs," once all such efforts were exhausted, "our real estate team comes in and prepares to put the house on the market" (see Page 2). This mitigation effort, Mudd said, helped resell more than half the foreclosed properties that "came into our inventory" in 2007. The remainder "sit on the market driving down local home prices and property values" (see Page 3).

In his talk, Mudd stressed the importance of giving defaulting mortgage holders who face foreclosure "an exit with dignity" (below). On Sept. 7, the federal conservator who took over Fannie Mae foreclosed on Mudd. Mudd has hired politically powerful Washington attorney Bob Barnett to negotiate his severance, which is expected to be a very dignified $9 million.

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