March 10, 2011 / 5:17 PM / 9 years ago

UPDATE 2-Obama housing aide Stevens steps down from FHA

* Stevens is a key player in drafting Obama housing policy

* Raised FHA borrower fees to strengthen agency reserves

* Stevens says “not sure yet” on his next job (Adds details about role of both Stevens and the FHA)

By Corbett B. Daly

WASHINGTON, March 10 (Reuters) - David Stevens, a key adviser to President Barack Obama on housing policy, said on Thursday he plans to step down as head of the Federal Housing Administration in mid-April.

Stevens, a former mortgage banker who took office in July 2009, has overseen an agency that has become an increasingly large prop for the battered U.S. housing market. FHA insures about one-third of all new home purchase loans, compared with less than 4 percent before the housing bust, according to industry publication Inside Mortgage Finance.

He steps down just as a debate heats up over how much support the government should provide the housing market over the long term.

“This is just the right time to transition and to get some fresh legs here,” Stevens told Reuters in a brief telephone interview.

Stevens was instrumental in drafting three proposals the Obama administration released last month for eventually replacing Fannie Mae FNMA.OB and Freddie Mac FMCC.OB, the mortgage finance giants the government seized at the height of the financial crisis.

He served as a senior vice president for single family loans at Freddie Mac from 1998 to 2005.

House Republicans have said they hope to approve legislation to wind down the two firms by the end of this year, though the Senate may delay consideration until after the 2012 presidential election.

In general, Republicans have been keen to shutter Fannie Mae and Freddie Mac and otherwise shrink the government’s housing role, while most Democrats think some continued government support is worthwhile.

The Republican-controlled House of Representatives was expected later on Thursday to approve a bill to kill a fledgling FHA program aimed at helping borrowers who owe more than their homes are worth refinance their loans into government-backed 30-year fixed-rate mortgages.

Stevens has been a forceful advocate for the program, though to date it has helped just 44 borrowers get new loans.

Next week, the House is expected to approve a bill to close down the administration’s main foreclosure prevention program.

Stevens was responsible for shoring up the finances at the cash-strapped FHA, which saw its share of the $10.6 trillion U.S. mortgage market balloon as lenders tightened credit after the housing bubble burst.

Mounting loan losses pushed the FHA’s mortgage insurance fund below its congressionally mandated level and raised fears the agency might need a taxpayer bailout. But Stevens raised borrower fees, putting FHA on sounder footing.

“Dave has been singularly focused on restoring FHA to fiscal health to protect taxpayers and ensure it can fulfill its mission of making homeownership available to qualified moderate-income, underserved and first-time home buyers,” Housing Secretary Shaun Donovan said in a statement.

Stevens has also been a key player in talks with big U.S. banks over accusations that many lenders improperly foreclosed on thousands of borrowers.

A number of major banks, including Bank of America (BAC.N), JPMorgan Chase (JPM.N) and Wells Fargo (WFC.N), have been asked to forgive some of the amount owed on troubled mortgages in a 27-page proposal sent to them by state attorneys general and federal agencies last week.

Asked if he expected a settlement to be announced before his departure next month, Stevens said he could not predict the timing of any settlement.

He said he was “not sure yet” what he would do after leaving the administration. (Reporting by Corbett B. Daly; Editing by Dan Grebler)

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