Analysts expect to see a new face at the helm of the agency overseeing Fannie Mae and Freddie Mac now that Democrats in the Senate have changed the rules, eliminating the use of the filibuster to block presidential appointments.
The Senate majority's instatement of the so-called nuclear option has cleared the path for Mel Watt's confirmation"" as director of the ""Federal Housing Finance Agency (FHFA), according to secondary market analysts at Barclays
Under the chamber's new rules, the president's nominees for all positions except Supreme Court judge can be approved with a simple majority vote, rather than the previous requirement of 60 ""yay"" votes.
Rep. Mel Watt (D-North Carolina) received 56 votes in favor of his confirmation on October 31st, just 4 votes shy of the number needed under the old rules but enough to be confirmed under the new simple-majority requirement.
Ã¢â‚¬Å“[H]e has the required votes and should be confirmed as the new FHFA director. In our view, this raises the level of policy risk,Ã¢â‚¬Â Barclays said, Ã¢â‚¬Å“as we would generally expect him to be more supportive of the administrationÃ¢â‚¬â„¢s policies. ... [K]ey areas of concern would be principal forgiveness for the GSEs and potential expansion of the HARP [Home Affordable Refinance Program] eligibility date.Ã¢â‚¬Â
Watt and the administration have previously expressed support for using principal forgiveness as part of the Home
Affordable Modification Program (HAMP) waterfall for GSE loans, Barclays notes. While Acting Director Edward DeMarco has resisted its implementation to date on the argument that the taxpayer benefits would be too small, under WattÃ¢â‚¬â„¢s direction, Barclays expects the FHFA to Ã¢â‚¬Å“take a fresh look at the administrationÃ¢â‚¬â„¢s proposal and be more amenable to implement it.Ã¢â‚¬Â
In addition, with WattÃ¢â‚¬â„¢s confirmation, Barclays says the administration may renew its push to expand the HARP cut-off date by a year. An extension of the HARP eligibility date would significantly increase the pool of HARP-eligible loans from the 2009 and 2010 vintages carrying interest rates above the 4.5 to 5 percent range, according to BarclaysÃ¢â‚¬â„¢ analysts.
Ã¢â‚¬Å“We estimate that these cohorts would likely see as much as a 50 percent increase in borrower eligibility,Ã¢â‚¬Â they said.
While the immediate attention upon WattÃ¢â‚¬â„¢s confirmation will be on potential changes to HARP or decisions surrounding principal forgiveness and will likely spark some near-term uncertainty, analysts with FBR Capital Markets & Co. believe Watt will be Ã¢â‚¬Å“very beneficial to mortgage credit availability.Ã¢â‚¬Â
Ã¢â‚¬Å“As director, we expect him to focus on removing barriers for well-qualified homeowners from receiving mortgage credit on loans securitized by Fannie and Freddie, and he is unlikely to lower loan limits, increase g-fees [guarantee fees], or implement new limits on multifamily lending,Ã¢â‚¬Â according to FBR.
Though his confirmation will probably further complicate housing finance reform, it makes it more likely there will be a continued government backstop, FBR said, adding, Ã¢â‚¬Å“We view this confirmation as positive for mortgage originators, homebuilders, and mortgage insurers and as a negative for private-label securitizers and mREITS [real estate investment trusts].Ã¢â‚¬Â
Ã¢â‚¬Å“It should be noted there is some chance his confirmation will not take place until after the Thanksgiving recess, but that is not a reflection of his lacking the necessary votes,Ã¢â‚¬Â Barclays said.