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Mel Watt nomination means ‘status quo’ for the mortgage industry

Comprehensive Fannie, Freddie reform is out

With Mel Watt now confirmed to take over Ed DeMarco’s director position at the Federal Housing Finance Agency, many mortgage industry watchers are expecting everything to stay very much the same.

In other words, don’t expect much change, said Anthony Sanders, a professor of real estate finance at George Mason University.

One of his top concerns is the fact that "Watt has no regulatory experience and was selected to counter DeMarco’s safety and soundness measures."

The takeaway for Sanders is that a Watt confirmation shows the administration "has no intention of shutting down or even regulating Fannie and Freddie."

His advice: be very concerned if you are an agency MBS investor or taxpayer.

He believes Watt will try to loosen the standards for Fannie Mae and Freddie Mac purchases even though the labor market remains a mess. Sanders essentially complies with the view that without a real jobs and economic recovery, any fuel poured onto the housing market is only going to cover or aggravate ongoing economic malaise.

Former U.S. Rep. Rick Lazio, R-NY, who worked on federal housing issues before joining the law firm of Jones Walker to handle affordable housing issues, also views Watt’s appointment as a “stark contrast” to Acting Director Ed DeMarco, who spent his years citing the need to protect taxpayers as a reason for refusing attempts to enact principal reductions.

"His views are in stark contrast with DeMarco — using subtle language, he seems to be communicating that when confirmed he will reinstitute the Housing Trust fund for the GSEs," Lazio wrote. He also is pessimistic about any type of reform of the GSEs taking place.

"With Watt at the helm, Democrats will have less motivation to take on reform if it means compromising with Republicans to get a deal," the former congressman added. He doesn’t see Republicans — even those interested in getting some type of housing reform done — compromising as much as Democrats would like them to, Lazio indicated.

"This is especially so given the gap between House Republicans and Senate Democrats," he added.

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