When Freddie Mac (FNM for short) was facing its financial crisis in 2008, there was a lot of talk about whether or not its crisis was the result of an over-the-top mortgage lending culture, or a result of the government not using regulations to keep FNM in line. The answer, of course, is a little bit of both.
Freddie Mac has named former Fannie Mae senior vice president and general counsel Greggory W. Petek as its new chief compliance officer. Petek, who begins his new duties on July 2, will oversee the regulatory and risk management functions across Freddie Mac’s home mortgage business.
In the wake of the Federal Housing Finance Agency’s move to assume control of Freddie Mac, the new senior compliance officer who was hired to oversee the troubled mortgage giant’s compliance, risk management, and regulatory functions said her focus will be on establishing a culture that puts the customers first.
Jerry Mauricio has been appointed senior vice president and chief compliance officer at Freddie Mac, a move that comes as the mortgage behemoth prepares to exit government conservatorship after more than a decade.
Freddie Mac, based in McLean, Virginia, which backs mortgage loans, was effectively nationalized during the 2008 housing crisis and is now facing the latest setback in its quest to exit government control, with the Biden administration removing Mark Calabria as director of the Federal Housing Finance Agency. He had made it a top goal to get Freddie Mac back into private hands. The Biden administration has indicated that privatizing Freddie Mac and Fannie Mae is not a priority.
Mr. Mauricio, who had been acting as Freddie Mac’s interim CCO since January, began his formal duties last month. He is in charge of Freddie Mac’s regulatory and conservatorship compliance risk management program. In an interview, he said he supervises approximately 45 employees in the compliance department and is seeking to expand the staff. He is directly responsible to Freddie Mac’s CEO.
Mr. Mauricio worked as a CCO at broker-dealer Capital One Investing LLC before joining Freddie Mac in 2019. Other financial companies where he has worked in compliance include BNP Paribas SA, Barclays Capital Inc., and Lehman Brothers.
Mr. Mauricio talked with the Wall Street Journal about his experience working in compliance and what he’s learnt from past disasters. The following are edited extracts.
WSJ: You worked for Lehman Brothers for a while at the beginning of your career. How does such knowledge assist you in dealing with the Covid-19 pandemic?
Mr. Mauricio: Thank you, Mr. Mauricio. I began working for Lehman Brothers in 1999 and stayed until the end. Almost losing my life four times during the 9/11 terrorist attack in 2001, but having to survive, get back on our feet, get the company back on our feet…the lessons gained from the agony of suffering those kinds of terrible occurrences is that we, as human beings, are extremely resilient. People join together to assist one another, and communities come together to aid one another. I was on the ground zero of the financial crisis when Lehman Brothers collapsed in 2008, and the same themes persist.
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While I would never want to go through anything like that again, it does teach you that everything will be OK. You’ll learn here because of the components of individuals joining together to assist one another, as well as the abilities of prioritization, concentration, and triage. It’s fascinating because I never imagined myself living during a pandemic. From my experience, I felt 9/11 and the fall of Lehman Brothers in 2008 were enough. I’m not making light of the epidemic; it’s a serious situation, but it underscores how those experiences aided me in navigating how we handle the situation.
After we got back on our feet, we used video technology extensively at Lehman Brothers in the mid-2000s. And then there’s the whole having a camera thing, watching my team’s visuals all around the world, searching for those face signals and indications that say, “Are people responding to the type of messaging?” Working at big multinational companies, I became used to this early on in my career. As a result, utilizing Teams or Zoom during Covid has become practically second nature.
WSJ: As CCO, what are some of your top priorities?
Mr. Mauricio: Thank you, Mr. Mauricio. To begin, we must ensure that we are managing compliance risk within Freddie’s corporate risk management framework… [I want to ensure that] not just compliance manages risks, but that everyone in our company takes compliance seriously and follows through.
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WSJ: What function does a CCO have in ensuring that the Fair Housing Act, which bans discrimination in mortgage lending, is followed?
Mr. Mauricio: Thank you, Mr. Mauricio. With regard to our fair lending responsibilities, our goal of affordability and access to housing for brown, black, and all individuals of all origins and colors, I take this very seriously. My compliance monitoring program ensures that we are doing all possible to promote and advance our fair lending objective, therefore I do bear some responsibility.
I also serve as the chair of the company’s LGBTQ resource group. Not only does this employee resource group strive to ensure that our workers have a welcoming atmosphere in which to come to work and be themselves, but it also contributes to the goal of housing affordability and nondiscriminatory access for everyone. This group also collaborates with a Black employee resource group to see how our workers can assist us advance these fair lending standards, as well as problems of affordability and nondiscriminatory access for everyone.
WSJ: What are some of the dangers you’re concerned about?
Mr. Mauricio: Thank you, Mr. Mauricio. I’m focused on [problems linked to] cybersecurity, information security, and the laws that apply to those sectors in terms of that interconnected risk. [My emphasis is on] ensuring that we have the proper compliance risk management measures in place.
Some major actors in the mortgage industry in the United States play critical roles in the process. Here’s what investors should know about the sector and the dangers they face when investing. Telis Demos of the Wall Street Journal explains. Martin Barraud/Getty Images/Martin Barraud
Mengqi Sun can be reached at [email protected].
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