President Obama is expected to move quickly in the New Year to replace controversial FHFA Acting Director Edward DeMarco, a move that could clear the way for increased principal reductions for underwater homeowners.
The Wall Street Journal is reporting that the administration is preparing a short list of potential nominees to replace DeMarco, who as head of the Federal Housing Finance Agency has authority over Fannie Mae and Freddie Mac.
Dispute over principal reductions
DeMarco has drawn criticism from some quarters for refusing to allow Fannie Mae and Freddie Mac to engage in principal reductions for certain underwater homeowners as part of a program of mortgage relief, as the administration as sought. Others have commended him for his stance, saying he is protecting the interests of taxpayers.
The administration would like to use such reductions to help at-risk borrowers lower their mortgage payments through loan modifications or refinancing to lower interest rates. Critics say the cost of such reductions would end up being absorbed by taxpayers, because Fannie and Freddie are currently in government conservatorship, while advocates say such a move would actually save money by reducing the number of defaults and foreclosures.
Senate must confirm permanent head
The FHFA, created in 2008 as a merger of several other federal housing agencies, has never had a permanent director. DeMarco, a career civil servant, took over as acting director in 2009 on an interim basis after his predecessor resigned. Shortly thereafter, Obama nominated North Carolina Banking Commissioner Joseph Smith for the post, but Smith withdrew his name in the face of Republican opposition in the Senate and no other nominees have been put forward since.
A permanent director would need to be confirmed by the Senate. It is not expected that Obama will put a name forward until after the "fiscal cliff" budget negotiations have been resolved, to avoid antagonizing Senate Republicans by seeking to replace DeMarco, who has considerable support among conservatives.
The Wall Street Journal reports that possible nominees include Susan Wachter, professor of real-estate finance at the University of Pennsylvania's Wharton School and a Clinton administration veteran; and Michael Stegman, a housing finance advisor to Treasury Secretary Timothy Geithner.
Other names being circulated include Johnathan Fietcher, deputy director for monetary and capital markets at the International Monetary Fund; and Jim Millstein, the corporate restructuring expert who oversaw the just-completed sale of the government's last remaining stake in American International Group (AIG).