President Obama’s most recent nominee for director of the Federal Housing Finance Agency (FHFA) could be just the guy to send the housing market spiraling right back into a disaster. Mel Watt, a 20-year congressional veteran from North Carolina, helped spearhead government programs that enabled welfare recipients to purchase homes during the housing bubble and that allowed borrowers with terrible credit to buy property without making any down payments. Watt played a key role in the formation of 2002’s “Pathways to Homeownership” initiative, which was a team effort on the parts of Freddie Mac, Fannie Mae, Bank of America, BB&T, and UJAMMA Inc. designed to make home loans accessible to welfare recipients. The program hinged on down-payment subsidies and on federal housing agencies like the GSEs literally eliminating their lending regulations entirely. Interestingly, former CEO of Bank of America, has reportedly “enthusiastically welcomed” Watt’s nomination for FHFA director. McColl used his ability to advance billions in loans for low-income neighborhoods to blunt opposition to BofA growth throughout his tenure with the lending institution. He has been blamed by multiple analysts for creating a situation in the banking industry in which “too big to fail” institutions were commonplace. In 2007, Watt continued his habit of encouraging lenders to ignore all reason in lending when he co-sponsored a bill designed to force the now-government-owned GSEs to continue meeting higher quotas for affordable lending even though their portfolios were already in dire straits.
Watt’s supporters seem to be basing most of their support for the nominee on hopes that he will endorse principal reduction for GSE loan modifications, something embattled acting FHFA director Edward DeMarco has refused to do on the basis that the move will reward those who default on their mortgages and ultimately cost taxpayers and investors even more money. Do you think that Watt would be a good FHFA director? Do you like him as a nominee, or just want anyone other than DeMarco?
Your comments and questions are welcomed below.