(Fixes verb tense in first paragraph)
By Margaret Chadbourn
WASHINGTON, April 14 The U.S. housing industry
has waited three months to find out how Mel Watt will govern
taxpayer-owned mortgage companies Fannie Mae and
Freddie Mac, and has been frustrated by his silence.
The former 11-term congressman from North Carolina, who took
over the agency that oversees the two enterprises in January,
has not delivered an annual strategic plan, which would usually
be public by now.
"We have yet to see or hear Watt's vision for housing
finance," said Clifford Rossi, a former banker and risk
executive at Freddie Mac who is now a finance professor at the
University of Maryland. "He is still getting up to speed."
Not only has Watt's reticence surprised the industry, but it
has disappointed some lawmakers who had hoped for guidance on
As director of the Federal Housing Finance Agency, Watt has
tremendous influence over Fannie and Freddie, which own or
guarantee about $5 trillion in U.S. mortgages. Banks, credit
unions, homebuilders, real estate brokers and would-be
homeowners all have a stake.
Sources inside and close to the FHFA say they believe he is
largely comfortable with the current direction of the two
companies and they do not expect to see dramatic changes.
At a private reception for him on Feb. 27, Watt, who
declined to be interviewed for this story, jokingly described
his routine as "meeting all day and reading all night."
In his sole policy action, just days after taking office in
early January, he set aside a decision by his predecessor to
increase the loan fees Fannie Mae and Freddie Mac charge. Watt
said he wanted to thoroughly review the proposal, which could
curtail mortgage availability.
The companies, which were seized by the government in 2008
after losses from investments in risky loans brought them near
collapse, purchase mortgages and package them into securities
for investors, which they offer with a guarantee. Providing
liquidity to the mortgage market ensures wide access to 30-year,
Watt, who recently addressed the FHFA's staff at a town-hall
style meeting, will provide what may be the clearest signal of
his intentions in a so-called scorecard, which provides targets
and specific plans for the mortgage companies. The scorecard is
usually released in the first quarter, and the delay is one
factor that has concerned the industry. The FHFA declined to
comment on when it may be released.
The scorecard will reveal whether Watt seeks to reduce
Fannie and Freddie's footprint, since it will lay out what fees
the agency will charge and the size of loans they can guarantee,
which can impact the cost and availability of mortgages.
Talks on overhauling the housing finance system have
intensified on Capitol Hill in recent months, but analysts say
it could take years for legislation to be enacted. That would
leave Watt with unusual power in the meantime to call the shots
on both long-term strategy and daily management decisions for
the two companies at the heart of the U.S. housing finance
Lawmakers working on overhaul plans have solicited ideas
from the Obama administration, banks, trade associations,
consumer advocates and Watt's agency.
But when asked to provide input, Watt declined, leaving some
lawmakers in the dark who had previously hoped he would position
himself as a go-to adviser on housing policy, according to
sources familiar with the bill drafting process.
Regulators often play a role in helping to shape legislation
for an industry they oversee. For example, several weighed in
with advice as Congress crafted the Dodd-Frank Act, the
financial regulatory overhaul enacted in 2010. At times they
even sat side-by-side with lawmakers in drafting the bill.
"Watt's voice ... has been muted. He hasn't publicly been
part of the debate," said Brandon Barford, a partner at Beacon
Policy Advisors, a public policy research firm.
Edward DeMarco, who led the FHFA in the wake of the 2008
financial crisis until Watt took over, had asserted himself as a
staunch defender of the taxpayers who pumped $187.5 billion into
Fannie Mae and Freddie Mac to keep them afloat.
Despite great political pressure, he rejected the idea of
letting the companies cut loan balances for troubled borrowers.
Watt could lead the agency in a different direction,
particularly now that Fannie Mae and Freddie Mac are profitable,
and consumer advocates want him to revisit DeMarco's decision.
"He's being a little cautious, but that's probably good at
this point," said James Lockhart, a former director of FHFA who
is now vice chairman at WL Ross & Co. "It's a big job to oversee
two of the largest financial institutions in the world, and
getting inside those behemoths is always an issue."
(Reporting by Margaret Chadbourn; Editing by Prudence Crowther)