President Obama’s nominee to lead the Federal Housing Finance Agency faced Congressional grilling for the first time, but offered few specifics about his plans for Fannie Mae and Freddie Mac.
But members of the Senate Banking Committee did get a chance to probe into Rep. Mel Watt’s, D-N.C., overall housing philosophy.
“Whether you rent or whether you own, having a home provides stability,” Watt told the panel.
With more than 40 years experience in the mortgage finance system, Watt supports the funding of social initiatives to develop housing opportunities — a philosophy that has kept some lawmakers skeptical of his nomination.
Watt tiptoed around questions levied by Sen. Pat Toomey, R-Pa., when the Senator demanded to know Watt’s stance on using eminent domain to restructure mortgages if the Home Affordable Modification Program does not work out for certain borrowers.
“I would insist any decision not put local governments in front of taxpayers and if a decision was being made, it needs to be made for strictly public reasons,” he answered.
The FHFA director role reversal would put the regulator on course to rapid changes, specifically principal forgiveness, something Watt publicly supports — and an initiative current acting director Ed DeMarco is clearly opposed to.
When questioned on this hot-button issue during his nomination hearing, Watt said he would make a decision based on the FHFA’s current strategy.
Yet, regulators questioned Watt’s sincerity on this point, noting the congressman urged for principal reductions in December even though the FHFA remained against it.
Sen. Mike Crapo, R-Ida., showed his skepticism about Watt’s ability to step into the FHFA’s top role.
“I am concerned with the nomination of Mr. Watt, but not to his own fault. My concerns reflect the unique position of the FHFA director,” Crapo explained.
He added, “The director has unchecked power and this requires an in-depth knowledge of the housing market, including the mortgage-backed securities industry, structured securitization and the operations of both private and public structures.”
Nonetheless, there are advocates for the Watt’s nomination, including the National Community Reinvestment Coalition, which urged the Senate to promptly confirm the congressman as FHFA director.
“Watt is highly qualified, holds an exemplary record as a public servant, and has the knowledge and expertise to be a strong leader for the agency,” said NCRC president and CEO John Taylor.
He added, “The Acting FHFA Director, Ed DeMarco, has seriously impeded recovery in the housing market by not allowing the GSEs to play a more prominent role in preventing foreclosures. The country needs an FHFA Director who will do what is best for homeowners, taxpayers, and the economy.”
Overall, the biggest challenge for Congress going forward is understanding Watt’s stance on the current housing market and the key initiatives he envisions putting in place going forward.
Many committee members believe his strategies remain cloudy.
“We need to understand Watt’s position on all of these issues before we consider his nomination,” Crapo concluded.