Fannie Mae GC: Call Me When I’m Not Sending You Work

Almost seven years after the housing crisis, it’s still a historic time to be at the Federal National Mortgage Association, better known as Fannie Mae.

In addition to lingering litigation with major banks over the 2008 crisis, the mortgage giant is working with competitor Freddie Mac, at the direction of the Federal Housing Finance Agency, to develop a “common securitization platform”.

Fannie Mae General Counsel Brian Brooks describes the initiative, which aims to develop a single mortgage-backed security for financing fixed-rate mortgage loans backed by one- to four-unit single-family properties, as “a huge, unprecedented thing that’s really never been done in the United States.”

“We’re basically writing on a blank sheet of paper,” Brooks said.

Headquartered in Washington, D.C., Fannie Mae is the leading source of residential mortgage credit in the U.S. secondary market, where newly originated mortgages are packaged into mortgage-backed securities and sold to investors.

Brooks was formerly GC at OneWest Bank, and a managing partner at O’Melveny & Myers. He recently spoke with Big Law Business about the challenges facing Fannie Mae and what he values in an outside law firm.

Part I Excerpts:

There are lawyers who are really sources of market information and intelligence, who are always letting you know what’s going on in your industry, even when you yourself may not have a need for them that day. Those are the people who really become the trusted advisors.

We do that a hundred percent of the time, seven days a week. No one’s going to ever know more about mortgage law than we know. What we don’t have is breadth. Any good law firm is going to have eight or ten clients in any given field.

That, I think, is really a key thing I look for — Are you only coming to me when you’re trying to sell me something, or you’re there for me all the time?

Below is an edited transcript of the first installment of the interview.

Brooks_B08764_highres photo from omm_greybackground
Brian Brooks (Courtesy of Fannie Mae)

Big Law Business: What motivated your move to Fannie Mae in 2014?

Brooks: Really, a lot of things. I’ve been in the mortgage finance sector for a long time. Fannie Mae was a former client of mine at O’Melveny. During my time representing the company outside, what became very clear was that, whatever your views as a policy matter, it’s hard to argue that Fannie Mae isn’t the most important company in the mortgage finance sector.

The opportunity to come here as part of a leadership team whose job is to basically create a sustainable housing finance system for the future — if you’re a mortgage lawyer, that’s about the biggest job you can possibly have. Frankly, it had been a personal passion of mine for a long time.

Big Law Business: To what degree, if at all, do you see this position as a kind of public service position?

Brooks: What I’ve always tried to do in all of my jobs is to make an impact. I think in our market economy there are people in all kinds of sectors who make a big impact. There are people who are public servants working in the government. There are people who are making an impact running big companies.

Fannie Mae is a bit of a hybrid, as you know. It’s a privately-owned, privately-constituted enterprise that nonetheless has a public mission and a federal charter, not unlike a bank in that way. Banks have federal charters and have missions, but also have a private sector dimension to them.

What I try and tell the team every day is that, as we seek to put more private capital in front of the taxpayer to bear risk, and as we try to re-platform this company, we’re fulfilling an important public mission. Whether that’s public service or not, I’ll leave to somebody else to decide, but what we’re doing here clearly is important to the economy.

Big Law Business: What are the biggest challenges the Fannie Mae legal department is facing right now?

Brooks: There are a number of challenges and opportunities that we try and address every day. One is that we’re in the process of trying to really create a new platform for the housing finance system.

That means several things. One is, as I’m sure you know, we and our competitors at Freddie Mac are collaborating to create something called a “common securitization platform,” which is designed to serve as, basically, an industry utility for issuing mortgage securities into the market.

By having this common platform, we can reduce the costs, and therefore ultimately increase liquidity, for the mainstream home-buyers who need to take out mortgages to finance their purchases of houses.

It’s a huge, unprecedented thing that’s really never been done in the United States, so we’re basically writing on a blank sheet of paper and bringing all of our best creativity. That’s one important thing. I think about that as building for the future.

On the other side, we’re in the process of wrapping up the last vestiges of a financial crisis litigation, where Fannie Mae collected, on behalf of the taxpayer, multiple billions of dollars from folks who had sold us mortgages, based on representations that frankly turned out not to be true.

In between those two pole stars — on the one hand, building a new platform; on the other hand, trying to finish redressing the last vestiges of the financial crisis — we’ve got a lot of day-to-day work to do around here.

Big Law Business: What firms do you work with the most?

Brooks: If you look over the last twelve months, the top five firms we’ve used are Quinn Emanuel, which is our trial firm in these financial crisis era lawsuits; the Venable firm here in DC, which represents us heavily in our multi-family space; O’Melveny, which is involved with us in a number of areas, ranging from some security litigation to privacy to fair-lending work; the Katten Muchin firm; and then rounding out the top five is Kelley Drye & Warren.

Big Law Business: What are you looking for, specifically, when you hire an outside firm?

Brooks: A couple of things. One is, for certain kinds of things, we want the best lawyer that it makes economic sense to engage. That last caveat’s really critical, because there are times when you could go further upmarket, but it might make sense to take the more economic choice.

There’s another thing I really value personally in lawyers, and this is something you don’t hear every day, but I think it’s worth highlighting. There are lawyers whose approach to relationships is that, when you get in trouble, they want to come pitch you for the business, but other than that, you don’t hear from them very often.

Then there are lawyers who are really sources of market information and intelligence, who are always letting you know what’s going on in your industry, even when you yourself may not have a need for them that day. Those are the people who really become the trusted advisors.

I know that phrase “trusted advisor” gets overused. Maybe it becomes trite, but it really means something. What it means is that, even when I’m not in a position to send any work your way, you’re still going to pick up the phone and let me know what’s going on in my industry.

A big part of that comes back to the point I made about depth versus breadth. We’re going to get deeper in our market than any law firm is, because all we do is mortgages. We do that a hundred percent of the time, seven days a week. No one’s going to ever know more about mortgage law than we know. What we don’t have is breadth. Any good law firm is going to have eight or ten clients in any given field.

And so even though I might know more about mortgages in a substantive kind of a way than your average lawyer, any given law firm, which might represent ten other clients in the space, can come to me and say, “Hey, Brian, here’s a trend we’re seeing. There’s a certain deal term that used to be acceptable, but it’s no longer being accepted,” or, “There’s a certain litigation theory that’s starting to get traction that you should know about, even though you might not be confronting it yet.”

The person who gives me that bit of intelligence — that’s most likely the person I’m going to want to hire when the case finally does get filed, because that’s the person who got me sensitized to it on day one, and they strike me as the expert.

That, I think, is really a key thing I look for — Are you only coming to me when you’re trying to sell me something, or you’re there for me all the time?

In Part II of the interview, Brooks will discuss why firms should charge less for associates’ hours.