Millions of Americans may get principle forbearance on their underwater mortgages, now that Rep. Mel Watt, D-N.C., has been officially sworn in as the first Senate-confirmed director of the Federal Housing Finance Agency (FHFA).
During a ceremony held Monday on the White House grounds and presided over by Vice President Joe Biden, Watt was sworn-in as director of the FHFA, conservator of government-sponsored enterprises Fannie Mae and Freddie Mac, as well as the 12 Federal Home Loan Banks. Watt will replace interim director Edward DeMarco as the top government dog overseeing the $5.5 trillion mortgage finance market.
‘Today's housing finance system is one of the keys to our economic recovery and I am grateful for the opportunity to help develop a strong foundation for moving this system forward for the benefit of all Americans at this critical point in our nation's history,’ Watt said in a statement following his swearing-in.
Watt was confirmed on Dec. 10 after significant delays. In November, Senate Republicans blocked a vote on Watt's confirmation, thus delivering a blow to President Barack Obama's efforts to install his own nominee as director of the agency.
Senate Democrats, so incensed by the blocked vote, then resorted to what is known as the ‘Nuclear Option‘ – a rare parliamentary action to change the rules so that federal judicial nominees and executive-office appointments can be confirmed by a simple majority vote, rather than the 60-vote supermajority that has been standard for nearly four decades. This paved the way for confirmation of Watt and several other presidential appointees.
Senate Republicans had previously cited concerns over Watt's qualifications for the job, which is viewed as critical to the future housing finance reform, as it will likely include the development of a solid plan to take Fannie Mae and Freddie Mac out of government conservatorship.
One of the main concerns among Republicans is Watt's inclination to support principal reductions for homeowners who are underwater on their mortgages. Such a measure, they assert, could harm taxpayers who backstop the mortgage insurance provided through the Federal Housing Administration, as well as the investors who hold the mortgage bonds.
DeMarco, who was the Republicans' preferred choice to head the FHFA, has previously expressed opposition to the concept of offering forbearance to underwater homeowners.
Meanwhile, home prices have risen considerably in recent months, bringing many homeowners who were previously underwater on their mortgages into positive equity.
Watt has not said definitively whether he will support measures providing forbearance to underwater homeowners – however he has made it clear that he is an avid supporter of housing relief for struggling Americans, without being specific as to what form it takes.
Watt caught many industry experts by surprise last week when he announced that that he intends to delay the increase in the guarantee fees charged by Fannie Mae and Freddie Mac previously announced by DeMarco on Dec. 9.
In an email statement, Watt said he would delay implementation of the new fee structure ‘until such time as I have had the opportunity to evaluate fully the rationale for the plan and the plan's likely impact on the [GSEs'] risk exposure, the cost and availability of credit, and how the plan would interface with the qualified mortgage standards.’