The IRS scandal brewing in Washington D.C. may prompt Senate Republicans to put Rep. Mel Watt’s nomination to lead the FHFA on the back burner for now, analysts with Compass Point Research & Trading said this week.

The firm, which follows housing and mortgage finance agenda items on Capitol Hill, believes growing speculation about Rep. Mel Watt’s confirmation as leader of the FHFA is overly optimistic.

The research firm says Senate Republicans may now be too busy dealing with nominations to other key departments – namely Labor and the EPA – along with the brewing controversy over allegations of targeted IRS audits against political groups to address Mel Watt’s nomination hearing right away.

"We do not expect Rep. Watt’s confirmation hearings to be held until mid-June at the earliest and the situation will undoubtedly remain fluid until then," the research firm said.

As the FHFA leadership question remains in limbo, the housing market continues to evolve with the nation’s shadow inventory down from the previous quarter with 3.28 million loans classified as in the shadow pipeline in Q1 2013, down from 3.53 million in the final quarter of 2012, Compass Point said.

The inventory experienced its largest drop ever, falling 18% year-over-year, Compass Point said.

"The drop was primarily due to an accelerated decline in foreclosure inventory, which came down 23% year over year. The accelerated decline in foreclosure inventory is likely to continue as banks and the GSEs search for ways to push these assets off their balance sheets," Compass Point said.