The Federal Housing Finance Agency Friday declared that the new CEOs of Fannie Mae and Freddie Mac — whoever that person might be — will earn no more than $500,000 per year, a major reduction in pay from the current job holders.
Both GSEs have hired head hunting firms and are in search of new CEOs to replace their departing chiefs.
In a press statement the agency said it will reduce top executive pay (since conservatorship) by nearly 75 percent%, eliminate bonuses, and establish a target for new CEO pay at $500,000.
In setting this new compensation framework, FHFA said it "concluded that further material reductions or uncertainty around compensation would heighten safety and soundness concerns."
Congress is expected to pass legislation this year capping GSE CEO compensation at roughly $250,000.
Three weeks ago National Mortgage News reported that Fannie Mae's head hunting firm, Heidrick & Struggles, is telling CEO candidates that the salary range, at best, might be twice what the president of the United States earns.
Departing Fannie CEO Michael Williams earned $900,000 in base pay in 2011 but with bonuses and other compensation he increased his take-home pay to about $6 million, which angered many members of Congress because of the cost of the GSE bailout.
Earlier this year two U.S. senators introduced a measure to cut any unpaid bonus money to executives of both Fannie, and Freddie Mac.
Industry executives expect that Congress may very well cap GSE executive pay — and soon. "I think it will pass both the House and Senate," said one trade group official.
Meanwhile, mortgage headhunters and even one former GSE executive suggested that FHFA might find a way around federal salary caps. "You can call the top guy a consultant and pay him extra — that might work," said a retired Fannie Mae manager.
As for the Fannie job search, the process is just beginning. Current Mortgage Bankers Association Dave Stevens has been mentioned as a candidate but has already passed on the position.
