FHFA Still Piloted by ‘Acting’ Head as Watts Vote Blocked

FHFA Still Piloted by ‘Acting’ Head as Watts Vote Blocked

10/31/2013 BY: TORY BARRINGER

Senate Republicans blocked a vote on the nomination of Rep. Mel Watt (D-North Carolina) to head up the Federal Housing Finance Agency (FHFA).

Watt’s nomination was stopped in a 56-42 vote to end the debate over his confirmation. Sixty votes were needed to invoke cloture and move forward.

Watt’s proponents say the former real estate lawyer would support stronger consumer protections and greater assistance for at-risk homeowners. Critics, though, say acting director Edward DeMarco has dutifully protected taxpayers, pursued policies that promote a healthy housing economy, and should get the nod for the director spot.

DeMarco has led the agency in an “acting” capacity since August 2009 following his appointment by President Obama when James B. Lockhart stepped down. Throughout his tenure, DeMarco has attracted criticism from Democrats and consumer advocates who say he hasn’t gone far enough to help distressed homeowners. One

of the bigger controversies surrounding DeMarco is his steadfast opposition to the use of principal forgiveness by the GSEs, which he believes would be too costly to taxpayers.

While he has said he would have to further investigate before making a move as FHFA director, Watt has in the past urged for principal reduction. (He asserted at a Senate Banking Committee hearing in June that he was advocating for his constituents in North Carolina at the time and not necessarily the country at large.)

The topic of principal forgiveness isn’t the only point where Watt and DeMarco diverge, however.

“A Watt-led FHFA would be a considerable departure from DeMarco’s tenure,” said FBR Capital Markets in an analysis released before the vote. “He would be less likely to lower the loan limits at Fannie and Freddie and would be unlikely to make aggressive changes to their multi-family lending programs. We believe that Congressman Watt could change the course of some of DeMarco’s strategic goals and could be more accommodative to lender concerns on clarity for representations and warranties.”

FBR also noted that Thursday’s failed vote could throw a wrench in Watt’s plans, with February 28, 2014, being the deadline for the congressman to file for re-election should his nomination not work out.

“Practically speaking, he would likely need to make a decision well before the deadline,” the firm said.

Should Watt take his name out of the hat, FBR has its eye on Sandra Thompson, who is currently FHFA’s deputy director of housing mission and goals, as the next potential nominee.

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