DeMarco out! Watt in!
The United States Senate confirmed Rep. Mel Watt (D-NC) as head of the Federal Housing Finance Agency (FHFA), relieving current Director Edward J. DeMarco of his "Acting Director" tag. Watt, whose nomination by President Obama was met with much controversy, reportedly has a drastically different policy than that of DeMarco, so the shift in power could result in a bit of a shock to the system. At the time, Sen. Bob Corker (R-TN) stated that he “couldn’t be more disappointed” with the nomination of Watt, with many Republicans promising to block the appointment of the nominee.
Many viewed Larry Summers’ backing out as a way to open the doors for Watt’s easy nomination, which is exactly what happened. Republicans ended up not gumming up the gears of politics, allowing a relatively simple voting process resulting in Watt meeting a 57-41 confirmation vote. Though Watt’s nomination was blocked back in October (due to insufficient votes), this time around, Watt seems poised to take on his new role after a recent Senatorial rule change requiring a majority vote as opposed to the formerly requisite 60 votes.
Reaction to Watt’s appointment has been pretty positive:
"The National Association of Home Builders applauds the Senate confirmation of Rep. Mel Watt as the new director of the Federal Housing Finance Agency. His nearly two decades of experience working on housing issues as a member of the House Financial Services Committee makes him the right man for the job during this critical period as Congress debates changes to overhaul the U.S. housing finance system,” said Rick Judson, chairman of the National Association of Home Builders (NAHB). “NAHB looks forward to working with Rep. Watt in his new role as FHFA director to help revamp Fannie Mae and Freddie Mac and to create a U.S. housing finance system that ensures liquidity and stability for homeownership and rental housing."
“Today's vote is a true victory for working families in New York and across the nation. I applaud the Senate for finally putting in place a permanent head of the Federal Housing Finance Agency who can advocate on behalf of homeowners desperately in need of mortgage relief,” said New York Attorney General Eric T. Schneiderman. “This confirmation marks a turning point for the FHFA and an opportunity to further our economic recovery by directly combating the foreclosure crisis. I look forward to working with Director Watt in our efforts to keep struggling New Yorkers in their homes."
"He brings a wealth of experience and dedication to his new position as Director of the Federal Housing Finance Agency. I am confident that his tenure will be marked by progress,” said U.S. Department of Housing and Urban Development (HUD) Secretary Shaun Donovan. “I look forward to working closely with Mel to further stabilize and strengthen the housing market so that it provides opportunity for all responsible families.”
National Association of Realtors President Steve Brown seems to be vying for choir lead as he sings Watt’s praises. “During his two-decade tenure in Congress, Watt served on the U.S. House Financial Services Committee and was an outspoken advocate for homeownership. His leadership on the Subcommittee on Housing and Community Opportunity and the Subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises helped promote and protect safe, affordable access to homeownership for creditworthy buyers. NAR looks forward to continuing our work with Rep. Watt as he transitions into his new role as FHFA director.”
The Mortgage Bankers Association (MBA), while positive, actually discussed the issues Watt will have to look into in order to contribute to greater economic recovery. “MBA looks forward to working with Director Watt on developing and implementing ideas to improve the function of the secondary mortgage market. Fannie Mae and Freddie Mac have been in conservatorship for more than five years, and it’s well past time to move forward on reform. As Director of FHFA, Congressman Watt will have a historic opportunity to shape the secondary mortgage market and the government’s role in housing,” said E.J. Burke, chairman of the MBA. “MBA believes a successful secondary mortgage market needs to produce a more stable and competitive system for all lenders. Transition to an improved system must retain and redeploy key aspects of the GSEs’ existing infrastructures, including certain operational functions, systems, people and business processes that have proven essential to the mortgage market’s smooth operation.”
Republican Sen. Mike Crapo (R-ID), ranking member of the Senate Banking Committee, voiced his concern over the nomination of a politician to fill what is predominantly an economic and technical position. “This is an independent agency with a highly complex task impacting our entire economy and it is for this reason that many senators noted the reason to avoid politics and to emphasize the technical expertise needed to fill this position,” said Crapo to Politico.
With Fannie and Freddie both close to repaying the $187.5 billion bailout received in the months after the monumental economic collapse, Watt will be overseeing the diminishing role of the GSEs, even amid impassioned pleas from both sides of the fence for the contrary. DeMarco had previously dismissed a debt forgiveness act that would target homeowners negatively affected by the economic downturn. Watt, while also having to determine the maximum loan size Fannie and Freddie are allowed to guaranty, could put that debt forgiveness act into play as his first major piece of legislation in office. DeMarco is expected to assist Watt during the transition.
“Watt looked like a failed nomination until Harry Reid followed through on his threat of implementing the ‘nuclear option,’” said Rick Lazio, former U.S. Representative from New York, and current leader of law firm Jones Walker’s affordable housing and housing finance practice. “His views are in stark contrast with DeMarco – using subtle language, he seems to be communicating that when confirmed he will reinstitute the Housing Trust fund for the GSEs. The confirmation of Congressman Watt will also have an impact on the chances of agreement on GSE reform. With Watt at the helm, Democrats will have less motivation to take on reform if it means compromising with Republicans to get a deal.”
There are hopes that, as Watt is a former Representative, other Reps from both sides will be able to get his ear and be able to talk fiscal policy with greater regularity.