Obama taps Rep. Watt for housing chief

President Obama tapped Rep. Mel Watt (D-N.C.) on Wednesday to oversee the mortgage giants Fannie Mae and Freddie Mac, but his nomination faces a bumpy road in the Senate.

Obama said Watt is the right man to take the helm of the Federal Housing Finance Administration (FHFA) because he has “led efforts to rein in unscrupulous mortgage lenders” as a member of Congress.

“He’s helped protect consumers from the kind of reckless risk-taking that led to the financial crisis in the first place. And he’s fought to give more Americans in low-income neighborhoods access to affordable housing,” Obama said Wednesday at an event announcing Watt’s nomination.

“So Mel understands as well as anybody what caused the housing crisis. He knows what it’s going to take to help responsible homeowners fully recover.”

Watt first came to Congress in 1992 and is one of the highest-ranking members of the House Financial Services Committee.

He is also a member of the Congressional Black Caucus (CBC), which had pressed Obama to consider black lawmakers in the House for Cabinet positions in his second term. Watt is a former chairman of the CBC.

{mosads}If Watt were confirmed to lead the FHFA, he would be tasked with winding down the outsized influence of Fannie and Freddie in the mortgage finance market. Republicans and Democrats agree on the need to scale back the agencies, which have been under government control since 2008, but the two sides have made little progress on a legislative solution. 

The acting director of the FHFA has butt heads with the Obama administration and congressional Democrats. Edward DeMarco has resisted pressure from Democrats to reduce mortgage principal for borrowers who are underwater on their loans, citing the risk to taxpayers.

Watt’s nomination earned mixed reviews on Capitol Hill, with Democrats expressing support and Republicans questioning why the White House hasn’t produced a plan to unwind Fannie and Freddie.

Sen. Elizabeth Warren (D-Mass.) called Watt an “excellent choice” while accusing DeMarco of showing “cold indifference” to struggling homeowners.

“Families deserve an FHFA that pursues helpful policies like principal write-downs and abandons senseless rules like those that prevent foreclosed homes from being re-sold to their original owners,” she said.

But Sen. Bob Corker (R-Tenn.), a member of the Senate Banking Committee, said Watt shouldn’t be confirmed until the Obama administration produces a plan for Fannie and Freddie.

“Before any nominee should be considered for this post, regardless of their qualifications, the administration should explicitly lay out how they will unwind these entities,” Corker said.

Senate Banking Committee Chairman Tim Johnson (D-S.D.) called Watt a “superb pick to lead the FHFA” and said he is planning on “moving his nomination expeditiously.” 

As the housing market has rebounded, so too have profits for the two mortgage giants. Fannie and Freddie both posted record gains in 2012 and have paid down a portion of their debt to taxpayers. 

House Financial Services Committee ranking member Maxine Waters (D-Calif.) said Watt’s involvement with legislation designed to protect homeowners demonstrates his commitment to help consumers.

Laying the groundwork for the “long-term stability of the housing market” needs “a man as thoughtful, well-informed, principled and fair” as Watt, she said.

Rep. Elijah Cummings (D-Md.), the ranking member of the House Oversight and Government Reform Committee, also hailed the news.

“Congressman Watt has deep expertise in housing policy and a record of distinguished service on the House Financial Services Committee,” he said in a statement. “He will be an excellent director for FHFA.”

The housing industry also is largely on board with the pick.
 
“Rep. Watt brings years of experience to this position at a pivotal moment as our nation’s housing market recovers,” said NAHB Chairman Rick Judson, a homebuilder and developer from Charlotte, N.C., said in a statement.

The White House previously attempted to replace DeMarco, nominating the North Carolina Commissioner of Banks to take control of the FHFA. But Republican opposition stymied the pick of Joseph Smith Jr., and he withdrew his name from consideration at the beginning of 2011.

This story was first posted at 8:18 a.m. and has been updated.