Obama taps Representative Watt as housing regulator

By Margaret Chadbourn

WASHINGTON (Reuters) - President Barack Obama on Wednesday nominated a veteran Democratic congressman to oversee mortgage financiers Fannie Mae and Freddie Mac, a choice that could set up a contentious political debate over housing policy.

Representative Mel Watt, a longtime consumer advocate in Congress, will likely face a confirmation battle in the Senate, where Democrats may need to secure some Republican votes to approve his nomination.

"Mel has led efforts to rein in unscrupulous mortgage lenders, 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.

If confirmed, the 67-year-old North Carolina lawmaker would replace Edward DeMarco, a career civil servant who has led the Federal Housing Finance Agency in an acting capacity since 2009.

Watt, who has served in Congress for two decades, "knows what it is going to take to help responsible homeowners fully recover," from the housing crisis, Obama said at the White House.

Consumer and housing advocacy groups, along with some Democratic lawmakers, had piled pressure on Obama in recent months to replace DeMarco. The regulator blocked a White House proposal to let government-controlled Fannie Mae and Freddie Mac slash mortgage debt for borrowers who owe more on their taxpayer-backed loans than their homes are worth.

DeMarco has argued that there are other ways to help distressed homeowners that pose less risk to taxpayers, and Republicans see him as a trusty steward for the public.

Fannie Mae and Freddie Mac, which currently back about half of existing U.S. home loans, were seized by the government in 2008 as mortgage losses mounted. They have received $187.5 billion in taxpayer funds to stay afloat, while paying about $58 billion to the Treasury in dividends.

Republicans pin Fannie Mae and Freddie Mac's 2008 failure on government efforts to extend credit to unworthy borrowers.

"I could not be more disappointed in this nomination. This gives new meaning to the adage that the fox is guarding the hen house," said Senator Bob Corker, a Tennessee Republican who sits on the banking committee that will consider whether to send Watt's nomination to the full Senate for approval.

"The debate around his nomination will illuminate for all Americans why Fannie and Freddie failed so miserably."

SHOW TRIAL?

On Capitol Hill, Watt, a member of the House Financial Services Committee, fought predatory lending and pushed for increased loan access for minority and low-income borrowers.

"The feeling remains that the White House is fine with the optics of yet another well-qualified nominee being rejected on an ideological basis," said Isaac Boltansky, a policy analyst with Compass Point Research and Trading. "This move will help the administration build support on the left, which is necessary for the impending budget battles, and it puts Republicans on the other side of a credible nominee."

Obama had nominated North Carolina banking commissioner Joseph Smith for the position in 2011, but he was blocked by Republicans and eventually withdrew his name from consideration.

Before settling on Watt, a former chairman of the Congressional Black Caucus, Obama had considered economist Mark Zandi, a registered Democrat who was an adviser to Republican Senator John McCain's 2008 presidential campaign. When Zandi's name surfaced, some conservatives made clear his ties to McCain were not enough to appease them.

"Congressman Watt has a reputation for integrity, knowledge, and fairness. He certainly can't be said to be a shill for the far left," said Julia Gordon, director of housing finance and policy at the Center for American Progress, a group aligned with Democrats. "It is going to be hard to find a principled basis to oppose his nomination."

Still, analysts expect stiff opposition from Republicans given their strong distaste for the idea of writing down loan principal for underwater borrowers. Watt's home state is the center for Bank of America, based in Charlotte, which has also been one of the top donors to his political campaigns.

The next FHFA director would be expected to guide Fannie Mae and Freddie Mac through an overhaul process that would reduce their role in the housing finance system, though Democrats and Republicans have yet to agree on what should replace them.

Democratic Senate Banking Committee Chairman Tim Johnson said in a statement that Watt is a "superb pick to lead the FHFA" and he wants to move the nomination expeditiously.

"We need someone that will stand up for borrowers," said Tracy Van Slyke, co-director of The New Bottom Line, which is leading a grassroots campaign called "Dump DeMarco." "This is an important victory. It's a good day for millions of homeowners."

(This story has been corrected to fix typo in rein, paragraph three)

(Reporting by Margaret Chadbourn and Steve Holland; Editing by Doina Chiacu and Tim Ahmann)

Source: http://news.yahoo.com/obama-tap-congressman-watt-housing-regulator-sources-115053251.html

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