Mel Watt was sworn in as the director of the Federal Housing Finance Agency on Monday afternoon, capping a contentious, partisan nomination process and giving the office that runs Fannie Mae and Freddie Mac its first Democratic head. Transportation Secretary Anthony Foxx administered the oath of office.
Watt, who had served as the representative from North Carolina's 12th District since 1993, replaces Ed DeMarco, who took over as acting director of the independent agency in 2009 and served in that position throughout the housing market's collapse and the administration's efforts to provide relief to homeowners and minimize foreclosures.
Since 2008, the FHFA has acted as the conservator for Fannie and Freddie after they failed in the financial crisis and received a government bailout, which ultimately totaled nearly $200 billion in taxpayer funds.
DeMarco stymied the Obama administration’s plans to offer principal reductions to homeowners with Fannie- and Freddie-backed loans, but he proved difficult for the White House to replace. Republicans blocked Watt’s confirmation for much of 2013, saying the agency’s head should be a technocrat, not a politician. The GOP’s filibuster of Watt was part of Senate Majority Leader Harry Reid’s motivation for changing Senate rules to remove the filibuster for executive nominees.
Watt’s Democratic supporters hope that the 68 year-old former lawyer’s presence at the agency will mean a policy that is more focused on home affordability. Many saw DeMarco as overly concerned with fiscal concerns and tight lending standards.
“Mel will do everything he can to maintain affordability of mortgages to the middle class,” said Rep. Michael Capuano, D-Mass., who served with Watt on the House Financial Services Committee. “It’s a delicate balance.”
Even before taking office, Watt took the first step toward reversing some of DeMarco’s efforts to tighten the standards Fannie and Freddie apply to the mortgages they guarantee. DeMarco had scheduled increases in the fees the two government-sponsored mortgage businesses charge for backing loans — a move intended to ensure that Fannie and Freddie only guarantee sound loans and to foster competition from private lenders. Watt announced in December that he would stay the increases in the so-called G-Fees until he had a chance to review them as director.
Watt takes office as both the House and Senate consider bills to end Fannie and Freddie and replace them with a new system of housing finance. Analysts don’t expect either of those bills to become law in the next few years, meaning that Watt will continue to have an outsized influence on the housing market as its recovery advances.
The two mortgage giants guaranteed nearly 70 percent of all U.S. mortgages by the end of 2012, according to Inside Mortgage Finance, a trade publication. Together, they have more than $5 trillion in debt outstanding, according to the FHFA’s figures.