Report Suggests Replacement for DeMarco Is in the Works

Edward DeMarco's days directing the ""Federal Housing Finance Agency"":http://www.fhfa.gov/Default.aspx (FHFA) may be numbered, according to a report from ""_The Wall Street Journal_"":http://blogs.wsj.com/developments/2012/12/10/white-house-seeking-new-regulator-for-fannie-freddie/.

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""People familiar with the discussions"" told _The Wall Street Journal_ the White House is preparing to nominate a new director. According to those sources, administration officials are still in the process of gathering names for potential nominees.

DeMarco has no shortage of nemeses both in and out of Washington, and many experts speculated that no matter who won the presidency in November's election, his time at agency would not last much longer.

Perhaps his most unpopular policy has been his staunch opposition to principal reductions for loans owned by Fannie Mae and Freddie Mac, both of which are held in conservatorship by FHFA. In a ""response"":http://www.fhfa.gov/webfiles/24113/PFStatement73112.pdf earlier this year to congressional inquiries over whether or not FHFA would direct the GSEs to implement the Home Affordable Modification Program Principal Reduction Alternative (HAMP PRA), DeMarco concluded that the benefits of such a program would not outweigh the costs and risks.

""Given our multiple responsibilities to conserve the assets of Fannie Mae and Freddie Mac, maximize assistance to homeowners to avoid fore closures, and minimize the expense of such assistance to taxpayers, FHFA concluded that HAMP PRA did not clearly improve foreclosure avoidance while reducing costs to taxpayers relative to the approaches in place today,"" he wrote in July.

The response brought down a firestorm from critics, including Nobel Prize-winning economist and _New York Times_ columnist Paul Krugman, who ""replied with a piece"":http://krugman.blogs.nytimes.com/2012/07/31/fire-ed-demarco/ titled simply, ""Fire Ed DeMarco.""

Not everyone has been critical of his performance, however. Supporters hail DeMarco as a director who refuses to gamble the future of the GSEs (and taxpayer money) on policies whose benefits are not certain. ""_The Washington Post_"":http://articles.washingtonpost.com/2012-08-01/opinions/35490860_1_fannie-and-freddie-principal-reductions-taxpayer-aid called his decision ""a defensible judgment call on a politically polarized question that is, in policy terms, actually very close.""

""Mr. DeMarco's statutory mandate includes the responsibility to make sure Fannie and Freddie ‘preserve and conserve' their (taxpayer-supplied) capital, as well as operate ‘consistent with the public interest.' That can be read to include not only the fiscal impact of two organizations that have already absorbed more than $188 billion in taxpayer aid but also the market repercussions of offering principal reductions to some people who have stopped meeting their contractual obligations while others have sacrificed to keep theirs,"" the publication said in an August editorial.

Should DeMarco be forced to depart his post, it seems likely that his successor will be someone friendlier to the idea of principal forgiveness and other oft-discussed assistance programs.