WASHINGTON (Reuters) - Fannie Mae FNMA.OB, the top provider of mortgage money in the United States, on Tuesday appointed its general counsel, Timothy Mayopoulos, as chief executive.
Mayopoulos, 53, will become CEO effective June 18, the company said in a statement, taking the reins barely a month after Fannie reported its first profitable quarter since September 2008, when it was seized by the federal government.
“I didn’t take the job with the expectation that anyone would say to me that I was doing a public service,” Mayopoulos told Reuters. “I view this as a great opportunity to lead what is fundamentally a commercial enterprise.”
Fannie Mae and smaller rival Freddie Mac FMCC.OB were placed in a government conservatorship at the height of the financial crisis as risky mortgage investments threatened their solvency. Combined, they have drawn more than $180 billion in taxpayer aid.
The companies, which own or back about 60 percent of all U.S. home loans, buy mortgages from lenders and repackage them as securities for investors with a guarantee.
Lawmakers from both parties want to see the government’s role in the housing finance system scaled back, which might mean winding them down. However, lawmakers disagree over how quickly and how drastically the government’s role should shrink.
Their uncertain fate has made it hard for Fannie Mae and Freddie Mac to retain key staff, and Mayopoulos called it his greatest challenge.
“The role we are playing in the markets as the single biggest provider of mortgage credit in the United States requires that we have experienced people,” he said.
Mayopoulos, who joined Fannie Mae as its general counsel in the spring of 2009, will succeed Michael Williams, who in January announced his plans to step down. Williams has led the company since 2009.
The Obama administration, Democrats in Congress and some officials at the Federal Reserve think both Fannie Mae and Freddie Mac could play a larger role in fostering a housing recovery by agreeing to write down loan balances for some struggling homeowners.
Fannie Mae and Freddie Mac’s regulator has resisted that step out of concern it could drive up losses at the companies, although it is studying the issue.
Mayopoulos said he thinks Fannie Mae is already striking the right balance between limiting taxpayer losses and helping distressed borrowers with government-backed loans.
“I don’t think we need principal forgiveness as a tool in our tool box to get the job done,” he said in the interview.
Mayopoulos previously was general counsel at Bank of America (BAC.N). He was pushed out in 2008 to create a role for current Bank of America CEO Brian Moynihan.
In a feud that became public in February, Bank of America stopped selling some mortgages to Fannie Mae after the government-controlled company forced the lender to buy back defaulted loans that Fannie Mae claimed had faulty underwriting.
At an investor conference last week, Moynihan said the bank would like to put the issue behind it, but added, “We are not going to give away the shareholders’ money.”
The promotion for Mayopoulos means he will take a big pay cut. Under a plan that Fannie Mae’s regulator announced in March to target CEO salaries at around $500,000 per year, his pay will go from about $2.6 million this year as general counsel to a base salary for the top job consisting of $600,000 in 2013.
Previously, the base pay for the chief executives at both Fannie Mae and Freddie Mac was $900,000 and they could earn as much as $6 million with deferred pay and bonuses.
Editing by Leslie Adler