Watt nears U.S. Senate confirmation as housing regulator

Reuters News
Posted: Dec 10, 2013 11:53 AM
Watt nears U.S. Senate confirmation as housing regulator

By Margaret Chadbourn

WASHINGTON (Reuters) - Democratic Representative Mel Watt's nomination to lead the agency that regulates taxpayer-owned mortgage financiers Fannie Mae and Freddie Mac looked set for final approval on Tuesday after clearing a hurdle in the U.S. Senate.

President Barack Obama nominated Watt in May to head the Federal Housing Finance Agency, but Republicans worried he would be too beholden to the White House and blocked a final vote when Democrats brought it up in October.

Last month, however, Democrats changed the rules to allow nominees like Watt to overcome filibusters with a simple majority in the chamber, which they control 55-45.

"Watt's confirmation will provide the housing market more certainty as our economy continues to recover from the financial crisis," Senator Tim Johnson, the Democratic chairman of the Senate Banking Committee, said in a statement.

Watt would replace FHFA Acting Director Edward DeMarco, a career civil servant whose focus during his four-year tenure has been on limiting taxpayer losses.

Fannie Mae and Freddie Mac, which currently back about half of existing U.S. home loans, were seized by the government in 2008 as mortgage losses mounted. They have received $187.5 billion in taxpayer funds to stay afloat, while paying about $185.2 billion in dividends to the government for that support.

Watt's confirmation would be a victory for the Obama administration, which has at times been at odds with DeMarco. Last year, DeMarco blocked an administration plan to allow Fannie Mae and Freddie Mac to reduce mortgage principal for some borrowers who owe more than their homes are worth.

Watt is expected to consider a targeted principal forgiveness program. The mortgage industry also anticipates that he will expand federal programs that allow borrowers with loans backed by Fannie Mae and Freddie Mac to lower their interest rates even if they are underwater on their loans.

Republicans have argued that Watt, a lawyer who has served in the House of Representatives since 1992, lacks the expertise to oversee the mortgage giants, and some have said they worry he would be unable to resist White House pressure to pursue the administration's policy goals.


"This is not a cabinet position where the nominee is supposed to be an advocate for the president. Instead, this is an independent agency with a highly complex task - impacting our entire economy," said Senator Mike Crapo of Idaho, who is the top Republican on the banking panel.

When the Senate attempted to advance Watt's nomination in October, he was backed by 56 of the 100 senators, below the 60 votes needed at the time to overcome filibusters. His rejection marked the first time since the Civil War that the Senate denied a sitting member of Congress an executive branch position.

But since he is supported by all 55 members of the Senate Democratic caucus, he should be easily confirmed this time.

Watt would take the reins at the regulator in the middle of a debate over the future of Fannie Mae and Freddie Mac, and he could have a big impact on the $10 trillion U.S. mortgage market by helping to overhaul the housing finance system.

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The Bush administration felt obligated to bail out Fannie Mae and Freddie Mac at the height of the financial crisis given their dominant position in the housing market. Without them, analysts agree the housing bust would have been much deeper.

But Democrats and Republicans alike agree there is a need to curtail the government's support for the housing sector, and there is a bipartisan effort under way in the Senate to wind down both companies, which are now posting record profits.

DeMarco has aimed to shrink the roles of the two mortgage giants by raising the fees they charge lenders and scaling back the maximum size of the loans they can back.

Homeowner and consumer advocacy groups have repeatedly called on Obama to fire DeMarco, who they say has not done enough to help troubled homeowners. The calls grew as DeMarco stood firm in his decision to block Fannie Mae and Freddie Mac from reducing loan principal.

The Obama administration has tried to replace DeMarco before. Obama nominated Joseph Smith, a former North Carolina banking commissioner, for the post in 2010, but he withdrew in the face of stiff Republican opposition.

(Reporting by Margaret Chadbourn; Editing by Andrea Ricci, Tim Ahmann and Chizu Nomiyama)