During the March 19 House Financial Services hearing on the conservatorships of Fannie Mae and Freddie Mac, Rep. Mel Watt (D-N.C.) yielded back the majority of his allotted time due to “media speculation over the weekend.”
The congressman’s unwillingness to question FHFA Acting Director Edward DeMarco was of note after several media outlets reported that the White House is considering appointing Watt to the permanent FHFA director job. DeMarco has been acting director of the agency for three and a half years.
Watt’s Communications Director Keith Kelly did not shed any light on the reports, telling Credit Union Times, “Congressman Watt has issued no statements regarding the reports and is not making any comments at this time.”
DeMarco has been under fire from the Treasury, congressional Democrats and state attorneys general for defying requests to implement principal forgiveness programs at the GSEs. In February, a group of 45 representatives, led by Rep. Elijah E. Cummings (D-Md.) and Rep. John F. Tierney (D-Mass.), penned a letter to President Obama urging him to remove DeMarco from the post.
On March 18, nine state attorneys general followed up with their own letter to Obama, also urging DeMarco’s ouster. New York Attorney General Eric T. Schneiderman and Massachusetts Attorney General Martha Coakley led the group, which also included the attorneys general from California, Nevada, Delaware, Illinois, Maryland, Oregon and Washington.
“The FHFA’s refusal to allow for principal write-downs that would result in more loan modifications is a direct impediment to our economic recovery and stands in way of our efforts to provide much needed assistance to homeowners in New York and across the country,” Schneiderman said in a release. “Under the leadership of Acting FHFA Director Edward DeMarco, Fannie Mae and Freddie Mac remain an obstacle to progress by refusing to adopt policies that will help maximize relief for struggling homeowners.”
The FHFA’s continued position that principal forgiveness conflicts with its goal of asset preservation is “not supported by reality,” the attorneys general assert in the letter.
“The agency’s current policy actually reduces the value of its holdings portfolio. It is far more profitable for any financial institution to hold a portfolio of performing $200,000 mortgages that lets families keep their homes than a portfolio of non-performing $250,000 mortgages headed toward default,” the attorneys said in the letter.
Should credit unions be concerned about a potential Watt administration at FHFA?
John Radebaugh, president of the North Carolina Credit Union League, called Watt well-qualified to fill the position. Not only does the longtime member of the House Financial Services Committee have a keen understanding industry issues, he’s also been accessible to the league and has listened thoughtfully to credit union concerns, he said.
However, Radebaugh said the topic of mortgage principal forgiveness has not come up during meetings with the congressman before.
“Whether it’s principle forgiveness or other financial services issues, our hope is that Congress and the administration won’t paint with a broad brush but rather will consider the specific impact of all of these proposals on credit unions and our members,” he said.
During the March 19 hearing, in response to questions from Rep. Nydia Velazquez (D-N.Y.) regarding why he opposes the write-downs, DeMarco said the FHFA spent six months carefully studying and analyzing principle reduction under the HAMP program and has released well-documented reasons to support its position.
“We continue on a path of energetic effort to provide foreclosure alternatives,” he said. “I think we have demonstrated that success through over two million homeowners being able to retain their homes.”
DeMarco also responded to a question from Rep. Shelley Moore Capito (R-W.V.) regarding the timing of the GSE conservatorship wind down, saying he’d like to see a gradual process that would be completed within five years. “It’s certainly time to begin that gradual stepping back,” he said, noting that most U.S. housing markets are showing signs of recovery.
The wind-down process should be gradual, DeMarco told the committee, so it won’t disrupt the housing market recovery, and will give private investors time to get comfortable and step back in to the secondary market.