It’s official: Congressman Mel Watt, D-N.C., will lead the Federal Housing Finance Agency after the U.S. Senate confirmed his nomination Tuesday afternoon.
Senators confirmed Watt as Ed DeMarco’s replacement, with a majority of the chamber's legislators voting in Watt's favor. The congressman easily obtained 57 votes, with 41 Senators voting against the appointment.
Ed DeMarco, who has served as acting director of the FHFA ever since the GSEs entered conservatorship, has long staved off attempts to use the agency as an instrument for enacting principal write-downs to help underwater borrowers.
The market has had plenty of time to get used to a Watt appointment, but he's still viewed as a major sea change for the conservator of Fannie Mae and Freddie Mac.
Housing advocates praised the move on the grounds that Watt is more likely to grant some form of additional housing aid, either through an expanded Home Affordable Refinance Program or principal write-downs. But the mortgage industry — especially investors in residential mortgage-backed securities — remain guarded about the prospect of Watt at the helm.
"The FHFA director has the power to help rebuild local economies and communities through direct action and administrative reforms, and we’re confident Mel Watt will do just that," said Alan Jenkins, executive director of The Opportunity Agenda, a group that advocates for expanding homeownership.
Elyse Cherry, CEO of Boston Community Capital, a firm that successfully enacted a principal reduction-shared appreciation program to help underwater borrowers, is a strong supporter of Watt's.
"I am glad the Senate is moving forward with Mr. Watt’s confirmation to the FHFA," Cherry said. "For too long, our policy at this agency has been headed in the wrong direction for the wrong reasons, and Mr. Watt’s nomination is a chance to turn things around."
But the Watt nomination certainly drew its fair share of skeptics from day one. With Mel Watt often viewed as more of a political figurehead, the mortgage industry was less receptive to the president's pick at first.
Several months ago, when Watt was first in consideration, Edward Mills, a senior vice president at FBR Capital Markets, said the president's DeMarco replacement pick would raise eyebrows on Wall Street.
"One of the hallmarks of the DeMarco tenure is that he was a nonpolitical figure before accepting this job," said Mills. "Since then, he has taken his stand as conservator very seriously and has been resistant to pressure from the Hill," he added.
But at this moment, it's unknown to Wall Street, the mortgage industry or even Congress how Watt will lead.
Still, the North Carolina congressman obtained mortgage industry support back in October when the Mortgage Bankers Association got behind his nomination.
Two months ago, MBA chairman E.J. Burke said he believed Watt could bring considerable experience to the post of FHFA director, given his strong base of understanding on a wide variety of public policy issues related to housing finance.