DeMarco Out? Rumors say Director Appointment Imminent

President Obama has picked a replacement for acting Federal Housing Finance Agency (FHFA) director Edward J. DeMarco according to multiple news outlets, citing an "administration official."  The nomination of Mel Watt, a long-time congressman from North Carolina, may be announced as early as today.

Watt is 68 and a native of Mecklenburg County, North Carolina.  He was a Phi Beta Kappa graduate of UNC Chapel Hill and received a JD degree from Yale University Law School where he was a member of the Law Journal.  He was elected to Congress representing NC-12 in 1992 and, among other assignments, serves on the House Financial Services Committee.

Watt will be the second person President Obama has nominated to fill the FHFA seat.  Joseph Smith, North Carolina's banking commissioner, was named in 2009 but Republicans in the Senate refused to allow an up or down vote on the nomination.  DeMarco, a hold-over from the Bush Administration, became acting director when James B. Lockhart resigned. 

Watt's nomination may face problems as well.  FHFA is regulator and conservator of Fannie Mae and Freddie Mac (the GSEs) and Republicans and Democrats are at odds over how to best proceed in restructuring the nation's housing finance system and the government's role in it, resolving the GSE  conservatorship, and the extent of the government's involvement in ending the ongoing epidemic of foreclosures. 

The possible nomination of Watts comes after months of demands from Democratic members of the House Financial Services Committee and multiple state attorney's general that the President replace DeMarco.  The Acting Director has been especially controversial because of his refusal to allow the GSEs to reduce the principal balances of distressed mortgages as part of their loan modifications.  Principal reduction is one of the tools used in the private sector but despite both political pressure and offers of incentives from the Treasury Department DeMarco has refused to budge on the issue.

Even though Watts' nomination is not official, the National Association of Home Builders (NAHB) has released a statement in its support.  NAHB Chairman Rick Judson said, "We applaud the nomination of Representative Watt to this important position. After four years in conservatorship, the future of Fannie Mae and Freddie Mac stand at a crossroad.

"Rep. Watt brings years of experience to this position at a pivotal moment as our nation's housing market recovers. NAHB looks forward to working closely with Rep. Watt to help address the many complex challenges facing the U.S. housing finance system upon his confirmation by the U.S. Senate," Judson said.