Sen. Mel Watt’s Intentions For The Federal Housing Finance Agency (FHFA)

On January 6th, 2014, Sen. Mel Watt was sworn into a five
year term as the first official director of the U.S. Federal Housing Finance
Agency (FHFA). Watt’s responsibilities were previously in the hands of Edward
DeMarco, who was viewed as someone who made progress in the stability of the
housing finance system by tightening credit and winding down failed agencies.

So, what’s the real news here?

It’s Watt’s intentions in the housing finance industry,
which may not be in line with his predecessor, DeMarco. Many are concerned that
Watt will bring back loan programs similar to those responsible for the housing
What implies those are Watt’s intentions?

When DeMarco was in office, he created reform to raise
fees that government sponsored enterprises (GSEs) charge borrowers with bad
credit or low down payments. This was largely seen as a positive initiative, as
it would help lenders like Fannie Mae and Freddie Mac return to profitability, and
they in turn could gradually pay back the U.S. Treasury for their bailouts. But
when Watt took his current position, he announced that he would postpone
DeMarco’s proposal, which was originally supposed to launch in March.

So, in short, there may be a large policy disagreement
and the question is … will Watt put a hold on reducing loan limits and raising
fees that will further position the government’s already large role in the
industry? Or, is his motive for delaying these fees an intent to ensure that
home purchases will remain a reality for homebuyers? Time will tell.
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