As the new GSE regulator, Rep. Mel Watt, D-N.C., would support the Federal Housing Finance Agency’s initiative to create a single securitization platform.
Watt told Senate Banking Committee members that it will be important for big lenders, community banks, credit unions and others to have access to this new securitization platform that Fannie Mae and Freddie Mac are trying to build.
He stressed during his confirmation hearing to be the new FHFA director that he has the “capacity to work with all the stakeholders in transitioning” to the new securitization platform and new housing finance system that Congress is moving toward.
Senate Republicans want to keep acting director Edward DeMarco at the FHFA and expressed doubts about
“This is a job that needs a real technician,” said Sen. Bob Corker, R-Tenn., as opposed to a politician who has served in Congress for over 20 years.
Watt noted there were a lot of technicians at Fannie and Freddie and government agencies that didn’t see the damage predatory lending would cause. “They had technical expertise and it didn’t work out well,” the president’s nominee testified Wednesday. The North Carolina congressman sponsored a bill in 2003 to stop predatory lending practices.
During his confirmation hearing, Watt noted that Fannie and Freddie should comply with the qualified mortgage rule to ensure good underwriting standards. However, compliance with the qualified residential mortgage rule isn’t necessary since the GSEs are being phased out. “Risk retention is not relevant in this interim period,” Watt said.
Sen. Patrick Toomey, R-Pa., asked the FHFA nominee about his position on the use of principal reduction to modify GSE loans, which DeMarco has strongly opposed and Watt has supported.
If confirmed, “I suspect I will be asked to look at that again because some people still think it is a relevant question—despite the fact that house prices have gone up and there are fewer and fewer people underwater at this point,” the congressman said.
The acting FHFA director rejected the use of principal reduction about a year and a half ago.
“I would start by studying carefully how that decision was reached what it was based on and build on that new information,” Watt said. “Then I would make a responsible decision.”
Watt acknowledged that he supported principal reduction because many of his constituents in North Carolina are underwater and seeking relief.
“As FHFA director, I will be a strong advocate for the taxpayers,” he stressed.
