One of the country’s biggest political footballs, housing finance reform, took some funny bounces over the past week.
Most notable were the first public appearances by the government’s new point man for running Fannie Mae and Freddie Mac, former North Carolina Congressman Mel Watt, who took office as director of the Federal Housing Finance Agency in January and was nominated more than a year ago.
Watt surprised a number of people in a speech at the Brookings Institution and a long interview with C-Span last week when he said he wasn’t wasting any time figuring out the future of housing finance or staying awake at night worrying about investors in Fannie and Freddie shares.
Nope. His job is to keep housing finance humming along right now. If that means expanding the “footprint” of the two lending groups, which guarantee the bulk of U.S. mortgages — because private lenders aren’t ready to take up the slack — then so be it.
Watt reversed the plan of his predecessor, Edward DeMarco, who hung on as acting director of the FHFA much longer than many people wanted, to lower the principal amounts for “conforming” loans that Fannie and Freddie are willing to guarantee.
In other steps to increase access to credit, Watt relaxed the terms for Fannie and Freddie to force lenders to take back loans and eased some requirements for down payments. He also moved to improve liquidity in the market by increasing the portion of non-guaranteed credits investors could acquire.
As for reforming housing finance, not his job. He is not going to think about it, not going to talk about it, and, said this 10-term congressman, he is not even going to read the legislative proposals for Fannie and Freddie’s future.
The latest such proposal, which calls for winding down the two entities and providing government guarantees to mortgages from private lenders, was approved last week by the Senate Banking Committee, but with such tepid support it is virtually certain to remain a dead letter in an election year.