The Senate has tabbed Mel Watt, a congressman from North Carolina, to lead the FHFA, which governs several housing entities, including Freddie Mac and Fannie Mae, and has a great deal of influence on American housing policy.
Mel Watt Brings Message of Hope for Struggling Homeowners
While there's no guarantee that Watt will meet expectations, sources believe he will steer the agency in a more consumer-friendly direction. To be fair, though, Watt has a very low hurdle to surmount. The previous director, Ed DeMarco, was only acting on an interim basis, and he stopped any attempts to require mortgage lenders to give relief to Illinois residents facing foreclosure.
Since he did so little to help homeowners avoid foreclosure, DeMarco was popular with mortgage lenders, who would lose millions of dollars if the FHFA pushed them into agreeing to principal write-downs, which would help many borrowers keep their homes and lower their monthly mortgage payments.
In a principal write-down, the lender agrees to forgive a certain amount of the underlying loan in exchange for the borrower's promise to begin repaying their home loan. Principal write-downs are particularly helpful for borrowers who owe more money on their mortgage loan than their homes are actually worth. After the housing market crashed in 2008, this trouble afflicted thousands of Illinois residents.
Homeowners Lobby for More Principal Write-Downs
Sources say housing advocates can't help but be excited about Watt’s future tenure with the FHFA. And many observers believe that he will green-light sources of aid beyond principal write-downs, like an expansion of the Home Affordable Refinance Program, which helps homeowners refinance unfavorable loans.
To underscore this point, Elyse Cherry, the CEO of Boston Community Capital, summarized her community's view of the appointment. “For too long, our policy at this agency has been headed in the wrong direction for the wrong reasons, and Mr. Watt’s nomination is a chance to turn things around."