A shift in leadership at the top of the nation’s home mortgage food chain could spell additional relief for homeowners still suffering from the effects of the recession, according to recent reports.
Sources say Congressman Mel Watt, a Democrat from North Carolina, has been selected to replace Ed DeMarco as the director of the Federal Housing Finance Agency, a relatively new government body that oversees the home loan market.
New Director May Increase Aid for Struggling Homeowners
Watt, who secured his nomination as director of the FHFA by a vote of 57-41 in the Senate, brings a significant amount of promise for homeowners whose mortgage principals are worth more than their actual homes, according to industry observers.
The previous director, DeMarco, was reluctant to use the agency as a tool for foreclosure relief, refusing to use his power to persuade home mortgage lenders to enact principal write-downs to help borrowers with underwater homes.
In a principal write-down, a lender agrees to forgive some of the borrower’s principal after the home that is the security for the loan loses a significant amount of value. In brief, principal write-downs are a powerful tool to stop home foreclosure.
But DeMarco, who has only been serving as an acting director, was reluctant to upset the housing market, so he didn’t make any bold moves while in office. Watt, however, enters office with a significant amount of political capital, and is thus more likely to offer additional aid to homeowners.
Homeowners Could Soon Receive More Principal Write-Downs
Of course, until Watt actually begins making decisions in office, the level of concern he will show for people looking to avoid foreclosure is purely speculative. But observers across the home mortgage industry believe big changes are on the way.
From the perspective of homeowners, housing advocates are optimistic. “The FHFA director has the power to help rebuild local economies and communities through direct action and administrative reforms, and we’re confident Mel Watt will do just that,” said Alan Jenkins, a prominent supporter of homeowners’ rights.
And industry-friendly sources are equally confident that Watt’s appointment will result in significant policy changes. Sources say mortgage lenders are already bracing for the possibility that they will soon have to agree to principal write-downs, at least in narrow circumstances. And this is good news for struggling homeowners.
New Housing Director Promises Relief for Homeowners Facing Foreclosure
Five years after the housing market took a historic plunge, the Senate’s confirmation of a new director for the Federal Housing Finance Agency could result in long-awaited relief for thousands of Americans in underwater homes.
Sources say Mel Watt, a Democratic congressman from North Carolina, has been tabbed to guide the FHFA, which oversees several government-backed housing entities, including Fannie Mae and Freddie Mac.
Mel Watt May Offer More Protection for Struggling Homeowners
Initial reports from the capitol predict that Watt will steer the agency in a more consumer-friendly direction, but this may be more due to the failings of his predecessor than Watt’s own policy beliefs.
The previous director, Ed DeMarco, was only acting on an interim director, and since the recession, he has actively thwarted any attempts to force mortgage lenders to forgive some principal on loans attached to underwater homes.
Since he did so little to help homeowners avoid foreclosure, DeMarco was particularly popular with mortgage lenders and their financial backers, who would stand to lose a significant amount of money if the FHFA pushed lenders into principal write-downs, which would help many borrowers keep their homes and lower their monthly mortgage payments.
“One of the hallmarks of the DeMarco tenure is that he was a nonpolitical figure before accepting this job,” said Edward Mills, a vice president at FBR Capital Markets. “Since then, he has taken his stand as conservator very seriously and has been resistant to pressure from the Hill,” he added.
This pushback from supporters of the mortgage loan industry only adds more support to the speculation that Watt’s appointment is good news for consumers.
Borrowers Hope to Secure More Principal Write-Downs
Indeed, advocates who look out for the interests of homeowners are excited about Watt’s future reign. Many believe that he will grant additional sources of aid beyond principal write-downs, such as expanding the Home Affordable Refinance Program, which has helped thousands of borrowers refinance bad loans.
And Elyse Cherry, the CEO of Boston Community Capital, a housing advocacy group, expresses a common sentiment about Watt’s appointment. “For too long, our policy at this agency has been headed in the wrong direction for the wrong reasons, and Mr. Watt’s nomination is a chance to turn things around,” said Cherry.
New Federal Housing Leader Looks to Help Underwater Borrowers
Seven months after he was initially nominated by President Obama to lead the Federal Housing Finance Agency, Congressman Mel Watt finally received the green light from the Senate to take the helm of the important housing agency.
And sources believe that Watt’s appointment is positive news for borrowers across the country who have seen the value of their homes dip below the amount of money they owe on their mortgages.
Housing Director Will Look to Prevent Home Foreclosures
The FHFA, which is tasked with regulating banks that extend home loans, has been very conservative under the guidance of its acting director, Ed DeMarco, in recent months. DeMarco, for example, refused to force lenders to help consumers reduce the principal owed on underwater homes.
But Watt’s appointment represents a shift in policy for the venerable institution. Prior to his election to Congress, Watt was a small business owner in North Carolina who also worked as an economic development attorney. He also has a strong track record in Congress of policing predatory lenders, which is why many observers believe he will fight for homeowners’ rights.
In a recent statement, President Obama signaled his expectations for Watt’s tenure, saying the country has “to build a housing system that’s rock-solid and rewards responsibility for future generations of American homebuyers so that a home is what it’s always been: a source of pride and middle-class security.”
Former House speaker Nancy Pelosi also tipped her hat to the incoming FHFA director, saying Watt is “uniquely suited to the task of striking a much-needed balance between credible financial industry concerns and the security of American consumers and homeowners.”
New Housing Leader Will Have Positive Impact on Homeowners
While Watt has yet to take office, many sources expect him to cajole more lenders into granting principal write-offs, which allows borrowers whose homes have lost a significant amount of value to shed some of their overwhelming home loan debt.
In addition, Watt may lobby for more funding for programs like the Home Affordable Mortgage Program, which has allowed thousands of homeowners avoid home foreclosure, but has recently been threatened by a rapidly shrinking budget.