Fannie Mae Picks Ex-BofA General Counsel Mayopoulos as CEO
Fannie Mae (FNMA) has selected Timothy J. Mayopoulos, the company’s current executive vice president, as its new president and chief executive officer, the Washington- based mortgage finance company announced yesterday.
In his new role, Mayopoulos, 53, will have a chance to do battle with his former employer, Bank of America, which fired him as general counsel in 2008. The companies are at odds over whether Bank of America will buy back billions of dollars of home loans with faulty underwriting that it sold to Fannie Mae.
Bank of America officials said Mayopoulos was fired to make room for Brian Moynihan, who later became Bank of America’s chief executive.
“It’s clear that Mayopoulos’s appointment is unlikely to deter Fannie Mae from its strategy of more aggressively pursuing its mortgage putback claims against Bank of America,” said Manal Mehta, a partner at Branch Hill Capital, a San Francisco- based hedge fund that has bet against the the bank’s stock in the past. “Given the players involved and the contentious nature of Mayopoulos’s departure from Bank of America, there’s going to be an interesting and challenging dynamic in reaching an amicable resolution.”
Fannie Mae, seeking to pay back its U.S. bailout, stepped up pressure last year by saying that Bank of America must repurchase loans if a private mortgage insurer drops coverage included in the original sale. Bank of America refused, and in January Fannie Mae cut the company off for funding new loans.
Mayopoulos joined Fannie Mae in 2009. In an interview yesterday, he said he would concentrate in his new position on building the foundation for a future housing-finance system. “I think it could be a housing finance system in which the role of past institutions are different from what they have been,” he said. “What ultimately happens to the GSEs will be a question for policy makers. It won’t be a question for us.”
The GSEs, or government-sponsored enterprises, include Fannie Mae and its smaller rival, Freddie Mac, which have operated under U.S. conservatorship since September 2008, when investments in risky mortgages pushed them to the brink of collapse. Fannie Mae has drawn a total of $117.1 billion in aid from the U.S. Treasury while under federal control.
Fannie Mae and Freddie Mac own or guarantee more than half of U.S. home loans. President Barack Obama and members of Congress are exploring ways to wind down the two companies.
Mayopoulos, who will make as much as $2.7 million this year in compensation, will make $600,000 beginning next year, Fannie Mae said. The company’s regulator, the Federal Housing Finance Agency, in March eliminated bonuses and set a target salary for the CEOs of Fannie Mae and Freddie Mac at $500,000.
Mayopoulos said it was worth taking a pay cut to serve an institution “that helps so many other people.”
He will replace current CEO Michael J. Williams, a longtime company employee who said in January that he would step down after serving in the top position for three years.
At Fannie Mae, Mayopoulos has been responsible for communications and government relations, among other duties.
“Tim’s appointment enables the company to sustain its rebuilding efforts and to accelerate our contributions to improving the nation’s housing finance system for the future,” Philip Laskawy, chairman of Fannie Mae’s board, said in a statement.
Fannie Mae had a profitable first quarter, reporting net income of $2.7 billion. The company cited lower credit expenses, a decline in delinquency rates and a drop in its property inventory.