WASHINGTON, June 27 U.S. Representative Mel Watt, President Barack Obama's nominee to oversee Fannie Mae and Freddie Mac, on Thursday welcomed a bipartisan effort in the Senate to shutter the two mortgage finance firms, saying it was important to "find the right path" to change the nation's housing finance system.
Watt made the remarks at a Senate hearing on his nomination.
So far, the 67-year-old North Carolina lawmaker has received scant support from Republicans, who question whether he has the technical expertise to run the Federal Housing Finance Agency, which oversees Fannie and Freddie, the country's two largest mortgage finance firms. The two government-sponsored enterprises were seized by the federal government in September 2008 at the height of the financial crisis.
Analysts have said Republican opposition could easily scuttle Watt's nomination, given that he will likely need to secure a super-majority of 60 votes in the Senate to overcome procedural hurdles. Democrats control the chamber by only a 54-46 majority.
Watt's nomination is the second attempt by the White House to fill the FHFA post. The previous nominee was blocked by Republicans and eventually withdrew.
In his opening remarks to the Senate Banking Committee, Watt said the current housing finance system is ripe for reform and there is work to be done to "find the right path out of a status quo that no one believes is desirable."
"The good news is that a broad consensus has emerged on the direction that our next steps must take us - towards a system driven by private capital that minimizes the risk to taxpayers," said Watt, who serves on the House of Representatives Financial Services Committee and its Subcommittee on Capital Markets and Government Sponsored Enterprises.
A bipartisan group on the Senate committee introduced a bill this week to wind down Fannie Mae and Freddie Mac and replace them with a government reinsurer of mortgage securities that would backstop private capital in a crisis.
Watt, if confirmed by the full Senate, would become an influential voice on the future of Fannie Mae and Freddie Mac. The companies have received $187.5 billion in taxpayer funds to stay afloat since being taken over by the federal government.
The firms, which own or guarantee half of all U.S. mortgages, were chartered by Congress to expand mortgage finance but operated as private, profit-making companies before they were seized by the government. They buy mortgages from lenders, which they repackage as securities to be sold to investors.
The committee's chairman, Democrat Tim Johnson, called Watt "well-qualified" and said he wanted to move the nomination expeditiously. The panel is expected to vote on the nomination following an early July recess.
"It is my hope that this time politics will be put aside so that we can focus on the management and oversight of the housing finance system," Johnson said.
The committee's ranking Republican, Mike Crapo, of Idaho, said the position "requires very specific expertise."
"Any nominee in this important position must be politically independent and have the necessary policy and technical expertise," Crapo said.
The FHFA's current head, acting Director Edward DeMarco, has held the position since 2009. He has been criticized by Democrats and consumer and housing advocacy groups for opposing more aggressive mortgage aid for troubled borrowers.
Fannie Mae and Freddie Mac, which charge lenders a fee in return for guaranteeing principal and interest on mortgages, are now posting record profits.