Remarks as Prepared for Delivery
Melvin L. Watt, Director
Federal Housing Finance Agency
National Association of Minority Mortgage Bankers of America (NAMMBA) - Connect 2018
Atlanta, GA
April 13, 2018

Thank you for inviting me to speak to this second national conference organized by the National Association of Minority Mortgage Bankers of America (NAMMBA).  I understand that this conference has grown substantially over the first one you convened last year and I am pleased that you asked me to be a part of your discussions.     

I'm especially pleased that NAMMBA has two important missions, both of which I fully support and to which I have devoted substantial time and effort:  

• Increasing the inclusion and engagement of minorities and women in the mortgage industry, and
• Preparing minorities and women to demonstrate a high level of professionalism and commitment to promoting sustainable homeownership. 

I am pleased to say that I believe that more and more industry participants are also coming to the realization that these objectives are important.  So I applaud the fact that the Mortgage Bankers Association has been a valued partner in supporting and encouraging the success of your organization and this annual conference as vehicles for enhancing the industry's commitment to these objectives.   

I'm quite sure that each of us has his or her own stories about how we came to the realization that inclusion, professionalism, and sustainable homeownership are critically important and quite often are integrally connected to each other.  Some parts of my story are perhaps a little unique and I believe may help me make some points I want to leave with you today.  So I hope you will indulge me to be a bit more personal in my remarks today than I have been in any of the mostly policy-oriented speeches I have given during the 4-plus years I have served as Director of the Federal Housing Finance Agency (FHFA).      

I discussed some of my background and experiences during my confirmation hearing before the Senate Banking Committee back in 2013, but most of what I said there got lost in the highly partisan debate about whether I deserved to be confirmed.  However, so much of what I said then and so much of the experiences I will share with you today have driven my interest in the things that are at the heart of NAMMBA's mission and they are still the things that drive me to show up to work every day.

I grew up in a little community called "Dixie," out in the country but with a Charlotte, North Carolina address.  It was there that I started to observe just how important where you live is to who you are and to what you value, and that having a place to live is "basic" regardless of whether you rent or whether you own.  I suspect that the thing that sparked these observations was spending the earliest years of my life in an old house my Mom rented that had no electricity and no inside plumbing.  It was a shack with a rusty tin roof and we could look up and see the stars at night through the tin roof and we could look down and see the ground through the broken, wooden floors.  I don't recommend it, but there's something about living that close to nature, having to go outside to use the toilet and huddling around a wood-burning stove to keep warm that makes you really appreciate having a place to live.    

My connection to home ownership started very early also when my Mom was fortunate enough to become a home owner.  When I was around 5 or 6 years old, I recall watching a big, long truck maneuver what had been an army barracks slowly down the road from the Charlotte airport to place it on a little lot that someone gave to my mother. 

That's the house I grew up in, four rooms - one bedroom for my Mom, one shared by me and my two brothers, a kitchen and a living room.  I get really emotional when I recall watching them drill the well on our lot so we could have running water for the first time and helping my Uncle dig the septic tank lines so we could have a bathroom inside.  Getting that inside bathroom was really something special.    

The Charlotte-Mecklenburg schools, which I attended, were still segregated back then, but North Carolina colleges were starting to accept African Americans and I was fortunate to get accepted by the University of North Carolina at Chapel Hill.  It was there that I started to develop an interest in business and I got my degree in business administration.  I was even more fortunate to get accepted at Yale Law School, where I expanded my interest in business.  There I wrote and published an article in the Yale Law Journal making the legal argument that investing in some kinds of minority businesses should be considered a charitable activity and that organizations making such investments should be granted tax exempt status.  After law school and after a brief detour through Washington and New York trying to "find myself," I decided to return to Charlotte to join a civil rights law firm. 

In less than eight years since the firm had started as one of the first racially integrated law firms in the South, the founding partner and a small cadre of civil rights lawyers had boldly confronted years of hate, segregation and discrimination in the schools, in employment, in housing and public accommodations, and in virtually every other aspect of life throughout North Carolina.  The firm's history of civil rights cases litigated and won remains legendary even today – the Charlotte-Mecklenburg and many other school desegregation cases, employment discrimination cases such as Griggs v. Duke Power and Albemarle Paper Company v. Moody, and many other landmark civil rights cases.  But the law firm had also started to recognize that the scope of its "civil rights" practice needed to expand to include economic and business development.  So when I joined the law firm in 1971 it was with the express purpose of standing up a business and economic development practice.

But we all know that hate and discrimination have a long and brutal history of using any means necessary to defend the status quo, and a critical turning point in my life occurred in the middle of the night on February 2, 1971, the night before I was scheduled to start work at the law firm.  In the middle of the night, the building that had housed the law firm's offices was fire bombed.  As a result, the very day I joined the law firm, it became necessary for the bulk of my business and economic development practice to become real estate law. 

After moving the law firm into temporary offices in an old downtown hotel we had to threaten to sue despite the fact that they were advertising commercial space for rent, I spent the next several years of my life doing on-the-job training as a real estate lawyer.  I formed a development entity consisting of minority professionals, we threatened suit to force the City to sell our development group some urban renewal (we called it "urban removal") land, I searched the title to the property, I prepared legal documents, dealt with architects and builders, closed a construction loan, and supervised construction of a building.  I prepared leases, acted as the leasing agent, closed a permanent loan, and finally I helped cut the ribbon on the largest minority real estate venture ever developed in Charlotte up to that point – a seven-story, 100,000 square foot office building. 

In the process, I got plenty on-the-job experience getting to know from the ground up all the local players in real estate – realtors, the Register of Deeds and her staff, title insurers, architects, lenders, builders, subcontractors, tenants and community leaders inside and outside my development group.  I really thought I was on my way to becoming a big-time commercial real estate lawyer, but my phone never rang for that purpose.  My law partners were constantly suing almost all the lenders for employment or other forms of discrimination and suing almost all the real estate companies for housing discrimination.  And I may have been "just a little ahead of my time." 

So over the course of 22 years, I settled into the practice of business law, representing mostly minority proprietors, partnerships and corporations and spending well over half of my time searching titles and closing real estate transactions for individuals and families, many of whom were becoming homeowners for the first time.    

It was a lot of fun and I was making a good living, watching my law partners kick down doors of discrimination while I was helping people realize their dreams of becoming entrepreneurs and home owners. 

During that time, I purchased my own first home.  Then a friend who was an architect and city planner suggested that we buy vacant lots next to each other with the thought that one day we might build houses on them and become neighbors.  We purchased two vacant lots in an historic, inner-city neighborhood that was going through a transition and seemed to have more homeless people living there than permanent residents and houses.  When we showed up to inspect the lots, we found abandoned cars and mud holes on them.  I was fascinated by the prospect that my family and my friend's family might one day become neighbors.  I was fortunate that my friend had a lot more vision than I did.   

About 7 years after I purchased my first home, my friend and I built houses on the two adjoining lots we had purchased.  He designed the houses and supervised construction and, of course, I handled all the legal work.  I used the equity from the sale of my first home to finance the construction of this new home, and my family and my best friend's family have been next door neighbors now since 1981.

In 1992, my next door neighbor, who by that time had served as the first African American Mayor of Charlotte, decided not to run for Congress and encouraged me to run instead.  I won the election and when I started in Congress in 1993, I was fortunate to be assigned to committees that matched my background, the House Judiciary Committee and the House Financial Services Committee.  I served on both Committees continuously for 21 years. 

The Financial Services Committee, of course, has jurisdiction over housing matters and years later it was the Committee called upon to respond to the housing and financial services meltdown.  The housing meltdown was not unexpected by me.  Long before the meltdown hit fully and the public started to see its most devastating impacts on housing and the economy, several of my Financial Services Committee colleagues and I had already introduced legislation to require lenders to make a determination of a borrower's ability to repay before making a mortgage loan.  The requirement we had first introduced at least 4 years before the housing meltdown, and then again 2 years before the meltdown, was adopted as part of the Dodd-Frank legislation as the "ability to repay" requirement.  It ultimately became the basis for the qualified mortgage or QM standard.     

When my nomination came before the Senate Banking Committee for consideration in 2013, counting my 22 years in the practice of law and my 21 years in Congress, I had 40+ years of experience in housing and real estate matters.  When asked why I wanted to be the Director of FHFA, here is what I said to the Committee:

"Over the years, home ownership and home equity have become the primary asset and source of retirement security for many families. Having a place to live, whether you rent or own, provides a sense of stability.  It impacts our decisions about schools and transportation.  It impacts our sense of community.  Growing up, there was nothing more basic for me, except family, food and the little Presbyterian Church that adjoined our front yard and made it impossible for us to get to the road without crossing the church lot.  I'm still a member of that church.  So where I lived even guided my choice of religions.

"A place to live is basic.  So over the years, I've worked to eliminate homelessness and I've been active in community development and neighborhood revitalization.  And, of course, I've walked hundreds of families through real estate closings, which for many of them was the most important financial transaction they will ever make.  So I was devastated when our housing finance system started to lose its way.  And I was among the first to realize that and Representative Brad Miller and I became the first to introduce anti-predatory lending legislation, four years before the housing meltdown became obvious. 

"I really can't think of anything I'd rather do now that would be more important than helping our housing finance system find a reliable way forward." 

While some members of the Committee questioned my nomination and experience or perhaps thought I was still just a little ahead of my time, fortunately I got just enough votes to be confirmed and I have now served as Director of FHFA for over four years.  I think the consensus is that FHFA has played a critical role during my tenure as Director in stabilizing the U.S. housing finance system.  We have also worked hard to ensure that FHFA and our regulated entities meet their diversity and inclusion obligations in employment and in every aspect of their business activities. 

We expect boards, management and employees to be diverse, we require diversity and inclusion strategic plans with goals that are measurable, and we examine our regulated entities to ensure that their plans are being fully implemented and are getting results. 

While there is still much work to be done, the results have been encouraging.  Perhaps most exciting are the results we are seeing at the financial transaction level where minority-owned firms are now involved in credit risk transfers, NPL and REO transactions, as co-leads and co-managers in K-deal securitizations, and as lead broker-dealers on benchmark notes.  We are also seeing progress in contracting with minority and women owned businesses for information technology and other technology-related services, data analytics, and administrative management and management consulting services. 

On January 6, 2019 my term will end.  For me, one who started in a house with no electricity or inside plumbing and now heads an agency that oversees trillions of dollars of our nation's housing finance, it has been quite an amazing journey.  Many will probably think of my story as an "American-Dream" story.      

So as I close, I want to make several specific points that are not academic or based on theory or conjecture, but are based instead on experience. 

First, I want to encourage you to own the life experiences and the crossroads and decision points that led you into this industry and to never forget where you came from and how you got here.  What you learned yesterday is invaluable and will make you a better professional tomorrow.  No two people in this room today have identical experiences, but each one of us has valuable experiences, valuable knowledge and valuable roles to play.  Share your experiences and your knowledge in meetings like this.  Sharing will help each of us learn how to perform our current roles better and sharing will allow others to see what is possible and what they can aspire to achieve.

Second, I know it sounds trite, but I strongly believe that a strong measure of success is how many times you get up after you're knocked down and how you respond to adversity.  As my mother says: "If it don't kill you, it's likely to make you stronger."  I dare say that there's not a person in this room who has not experienced adversity and challenge.  I've experienced it throughout my journey and I continue to experience it every day as Director of FHFA.  Somehow, we seem never to be perceived to be quite good enough or quite smart enough.  Or maybe some people still think we are "still just a little ahead of our time."  If my life experiences have taught me anything, they've certainly taught me that I have to keep getting up and I have to keep showing up.  This is not an easy industry to work and advance in.  To succeed you must "know your stuff" and really be exceptional at what you do, and you must keep getting up and showing up.  

Third, use your experience and professionalism to advance homeownership that is sustainable.  Using every tool at your disposal to enhance a borrower's ability to obtain and be able to repay a mortgage is commendable and requires the knowledge and skills of a professional.  But getting anyone into a mortgage to buy a home who cannot reasonably be expected to have or to maintain the ability to repay the mortgage is irresponsible.  As a professional you are required to know the difference and to use your experience to benefit the borrower, not just to make money. 

Fourth, home ownership can be financially rewarding, even in neighborhoods that are not financially-elite.  The bulk of the wealth of minorities is still in homes – usually not in gated communities and certainly not in stocks, bonds or other investments.  Still the most valuable asset I own is the lot I purchased in 1974 and the home I built on it in 1981 using equity from the sale of the first home I owned.  The home I built is now within walking distance of the center of Charlotte, the Charlotte Panthers football stadium, the Charlotte Hornets basketball arena, restaurants, museums and million dollar condos.  I'm proud to say also that it's located down the street from a high-rise for low-income seniors and affordable rental housing owned by the Salvation Army.  So I'm a true believer that ownership and rental housing, both market rate and affordable, can peacefully coexist in the same community and that neighborhoods that are economically, racially, culturally and ethnically diverse are stronger. 

The final point I want to make is this: because where we live is so basic to us and to our customers and clients and so central to our financial wellbeing, we must view the roles we play in this industry not just as jobs.  We must view our roles as critical positions of responsibility and trust.  So I thank you for meeting your responsibilities professionally and fairly, and for continuing to stand up and show up.  We need each of you to remain engaged in the mortgage and housing finance industry.  We need you to take advantage of opportunities, to develop your skills and to prepare yourselves for new opportunities.  When we hear diverse voices contributing to the conversation, new experiences are brought to bear, new ideas emerge and new possibilities become realities.  You are not ahead of your time.  Your time is now. 

Thank you for allowing me to be your guest and please continue to show up.