After months of weighing potential candidates, President Obama finally has his pick for the director of the Federal Housing Finance Agency, which oversees the housing giants Fannie Mae and Freddie Mac. Obama wants to tap Representative Mel Watt, a Democrat from North Carolina.
Confirmation is far from a sure thing. Watt’s nomination has been met with cheers by many groups that work with borrowers, from the National Community Reinvestment Coalition to MoveOn.org, though some liberals say he’s too close with banks, which are a big part of North Carolina’s economy. Republicans have blocked many Obama nominees to other posts (and once before on this one) and have generally supported Ed DeMarco, who currently runs the FHFA, for going against Obama and opposing efforts to reduce the mortgage principal of underwater homeowners.
If Watt is confirmed, these are some of the questions he’d have to tackle:
The political: For more than a year, housing advocates have lambasted DeMarco for preventing Fannie and Freddie from reducing the mortgage principal of underwater homeowners. Activists have run a “Dump DeMarco” campaign for more than a year and would certainly keep the heat on Watt. It could also become a litmus test for Republicans in the confirmation process. More than 10 million borrowers owe more than their home is worth.
The obscure: The FHFA has been reconsidering how Fannie and Freddie make sure foreclosures are protected against damage and liability on properties. In March, DeMarco said the agency would force banks to trim the commissions they charge on setting up insurance on properties. But he stopped short of cutting out banks as middlemen altogether. As American Banker’s Jeff Horwitz reported in February, DeMarco spiked a plan that would have saved Fannie Mae $145 million a year by doing that.
The Big Kahuna: Watt also would become a key player in figuring out the future of Fannie Mae and Freddie Mac. It’s been five years since the housing giants were bailed out by the federal government, and Obama and some in Congress have called for Fannie and Freddie to be wound down. But hedge funds, including Paulson & Co., are lobbying for Fannie Mae and Freddie Mac to morph into private companies instead. The debate’s become all the more complicated now that Fannie and Freddie are actually turning a profit and helping reduce the federal defect.
But first things first: Let the confirmation games begin.