Mel Watt’s time as the director of the Federal Housing Finance Agency is officially over.
Watt became the first Senate-confirmed director of the FHFA back in 2014, and led the FHFA for five years, but his term as FHFA director ended on Jan. 6, 2019.
Going forward, the FHFA will be led by Comptroller of the Currency Joseph Otting, who was picked by President Donald Trump to serve as acting director of the FHFA while Mark Calabria is awaiting Senate confirmation to replace Watt on a permanent basis.
In December, Trump nominated Calabria, who serves as Vice President Mike Pence’s chief economist, to replace Watt as FHFA director.
But as Calabria is waiting for Senate confirmation, Otting has officially replaced Watt as the leader of the agency overseeing Fannie Mae and Freddie Mac.
Otting took over as Comptroller of the Currency in November 2017, bringing a background in banking to the regulatory role.
Otting served as the CEO of OneWest Bank from 2010 until 2015, working alongside Department of Treasury Secretary Steven Mnuchin, the bank’s former chairman. Otting was let go by OneWest when the bank merged with the CIT Group in 2015.
Prior to joining CIT Bank, Otting worked for U.S. Bank from 2001 and 2010. During that time, Otting served in various roles, including Oregon market president, executive vice president, and east region commercial banking group manager.
From 1986 to 2001, Otting held roles at Union Bank, which included deputy regional vice president, senior vice president, executive vice president, and group head of commercial banking.
Otting began his career at Bank of America in branch management, preferred banking, and commercial lending.
Otting brought that experience to the OCC, and now he will bring it to the FHFA as well.
Otting replaces Watt, who served in Congress before taking over at the FHFA. Watt replaced Ed DeMarco, who held the position of acting director of the FHFA for six years.
Watt’s five-year term at the FHFA was relatively quiet, in the scheme of things, compared to what happened with Fannie Mae and Freddie Mac after the housing crisis, but that doesn’t mean that Watt didn’t lead his fair share of headlines.
Most recently, Watt faced misconduct allegations involving an FHFA employee.
During his time at the FHFA, Watt oversaw mostly smooth sailing for both of the government-sponsored enterprises. The GSEs were profitable in nearly every quarter of Watt’s tenure, with billions of dollars flowing back to the Treasury.
But that wasn’t all smooth sailing. Last year, both Fannie and Freddie needed money from the government for the first time since 2012 after the Republican-led tax law led to deficits at both of the GSEs.
Watt tried to head that off a bit when he authorized the GSEs to retain $3 billion in capital reserves, a change from the previous conservatorship agreement that dictated that both of the GSEs needed to allow their capital reserves to be drawn down to $0.
Nevertheless, the GSEs needed more money from the Treasury for the first time since 2012.
Watt also oversaw the development of the single security, a joint mortgage-backed security that will be issued by both Fannie and Freddie. The single security is scheduled to launch later this year.
The FHFA also recently issued new rules surrounding the adoption of alternative credit scoring rules that would effectively prohibit the government-sponsored enterprises from using the VantageScore credit scoring model because of conflicts of interest with the company’s backers, Equifax, Experian, and TransUnion.
Watt also faced pressure to allow the GSEs to engage in principal reduction, a decision he called the “most challenging” of his time at the FHFA. Eventually, the FHFA relented and allowed some principal reduction.
For the most part, Watt held course with the GSEs, engaged in housing finance reform where allowed without congressional approval, but continually held that true housing finance reform should come from Congress.
As for the FHFA, it’s now in the hands of the Trump administration, which has signaled a desire to end the conservatorship. Calabria has indicated that he feels the same way, but he’s not in charge yet.
For now, it’s Joseph Otting at the FHFA. How long that will be and what it will mean remains to be seen.