Congressman Mel Watt, D-N.C., President Obama's nominee to head the Federal Housing Finance Agency (FHFA), reportedly told members of the Senate Banking Committee on Thursday that he supports plans to liquidate government-sponsored enterprises Fannie Mae and Freddie Mac and would consider allowing them to reduce mortgage principals for underwater borrowers, if he is confirmed.
During the confirmation hearing, Watt, a member of the House Financial Services Committee, expressed support for a bill introduced last week by a bipartisan group of senators that aims to replace Fannie Mae and Freddie Mac with a government reinsurer of mortgage securities that would backstop private capital.
The Housing Finance Reform and Taxpayer Protection Act of 2013, drafted by Sens. Bob Corker, R-Tenn., Mark Warner, D-Va., and six other members of the Senate Banking Committee, aims to transition the GSEs out of government conservatorship over a five-year period, while at the same time protecting taxpayers during the transition process.
Watt said he agrees that the housing finance system is ripe for reform – although Democrats and Republicans disagree on what steps should be taken and when.
‘The good news is that a broad consensus has emerged on the direction that our next steps must take us – towards a system driven by private capital that minimizes the risk to taxpayers,’ Watt told members of the committee, as per a Reuters report.
Watt's nomination to the FHFA is facing strong opposition from Republicans, some of whom feel he does not have the right qualifications to handle the job of overseeing the two GSEs, which own or guarantee more than half of all U.S. mortgages.
Watt reportedly defended his ‘technical qualifications’ before the committee on Thursday, telling the panel he has ‘the skill set to do the job,’ according to the Reuters report. Still, many committee members were not impressed, according to the report.
Republicans have been particularly critical of Watt's support for a proposal floated by the Obama Administration to reduce loan principal for borrowers who are underwater on their Fannie- or Freddie-backed mortgages. Most have said it would be irresponsible for the government to bailout underwater homeowners using taxpayer dollars.
As such, Watt faces an uphill battle in the Senate, where he will need at least 60 votes in order to win the nomination – which will not be easy since Democrats control the chamber by only a 54-46 majority. So far, Sen. Richard Burr of North Carolina is the only Republican who has expressed support for Watt's nomination.
If confirmed by the full Senate, Watt would replace Edward DeMarco, current acting director of the FHFA. DeMarco has said he would block the administration's proposal to bail out underwater homeowners.
The Senate has not scheduled a vote on Watt's nomination.