Joe Smith declined to be renominated by the Obama administration as director of the Federal Housing Finance Agency after meeting staunch Republican opposition, a White House official said. Smith, currently the North Carolina banking commissioner, originally accepted the nomination late in 2010, and was approved by the Senate Banking Committee in December. Had he gone forward with the nomination process through Congress and become the director of the FHFA, he would have replaced Acting Director Edward DeMarco as the de facto regulator of mortgage giants Fannie Mae and Freddie Mac. The news was first reported by The Wall Street Journal Friday and confirmed to HousingWire by a White House official. "Joe Smith is a candidate whose background and expertise makes him highly qualified to lead the FHFA," the White House said in a statement. "Unfortunately, there is not a clear path to confirmation for his nomination at this point in time, and Mr. Smith has asked not to be renominated in the 112th Congress." But it seems the clock ran out. Although Smith did clear committee, many Republicans voiced concern about his qualifications. With Republicans taking over the House in January, Smith declined to go forward. He has since been renominated as the North Carolina Commissioner of Banks by Gov. Bev Perdue, according to a statement put out Friday. One of Smith's harshest critics was Sen. Richard Shelby (R-Ala.), then the ranking Republican on the Senate Banking Committee. "The first confirmed director must hit the ground running — equipped with the skills and experience needed to be a strong regulator free from influence by the current administration," Shelby said in a released statement after the committee's vote in December. "In other words, we need a watchdog not a lapdog." Jim Vogel of FTN Financial said Smith's decline and the Treasury Department's delay on the future of housing finance white paper to February is further proof that Fannie Mae and Freddie Mac reform is not on the legislative calendar for this year or even 2012. He added that the news may possibly explain the "odd run-up" in Fannie and Freddie shares on the Pink Sheets, the destination for stocks worth less than $1. "Despite the headline flames fanned on Freddie and Fannie in recent weeks, it will take a major course change in housing (or the MBS market) to create the impetus for a new system of single-family finance," Vogel said. But Arnold Kling, a former economist with Freddie Mac and a scholar at the Mercatus Center at George Mason University said small reforms can be made, and Congress can start by reducing the maximum loan amounts eligible for purchase by the housing agencies. "Although this limit is scheduled to drop in high-cost areas later this year, there should be an across-the-board reduction of 20 percent in the loan limits for Freddie, Fannie, and FHA," Kling said. "This is needed in order to create room for private lenders to enter the mortgage market while Congress debates the process of how to reform the system as a whole. As it stands now, the loan limits are currently set so high that essentially the entire mortgage market has been set aside for the agencies." Kling admitted reform for Fannie and Freddie will test the ideologies of a split Congress and will take time. "Housing policy is a difficult issue, and no plan will be void of controversy. Because finding consensus on a large-scale reform will take time, policymakers should implement these steps now to protect the private mortgage market from extinction," Kling said. For more on the possible outcomes of Fannie and Freddie see the February issue of HousingWire. Write to Jon Prior. Follow him on Twitter: @JonAPrior