Rep. Melvin Watt, D-N.C., may be President Obama’s choice to run the Federal Housing Finance Agency but it is doubtful the Senate would confirm a long-time member of the House Banking Committee to replace FHFA acting director Edward DeMarco, according to analysts at FBR Capital Markets.
The Wall Street Journal reported that Watt is under consideration for the FHFA post to oversee Fannie Mae and Freddie Mac. But the possible nominee supports principal reduction.
“Senate Republicans will be extremely reluctant to support a candidate who has publicly backed principal reductions,” the FBR analysts said in a March 18 report.
GOP senators derailed the confirmation of the president’s last FHFA nominee—North Carolina banking commissioner Joseph A. Smith Jr.—because it appeared he would permit principal reductions on GSE-guaranteed loans. DeMarco has resisted Treasury Department pressure to use principal reductions in modifying underwater loans.
Meanwhile, Fannie and Freddie’s stock has gotten a lot of support from the news of Watt’s possible nomination and introduction of a bipartisan bill—
Fannie’s stock was trading at 30 cents a share last week and it closed at 51 cents on Monday.
The jumpstart bill also prohibits Congress from tapping Fannie Mae and Freddie Mac for additional revenue by raising guarantee fees to pay for other government programs.
