Businessweek focuses on Watt’s new job

The latest Bloomberg Businessweek ponders former U.S. Rep. Mel Watt’s approach to his new role as head of the Federal Housing Finance Agency.

Mel Watt hadn’t even been sworn in as the head of the Federal Housing Finance Agency when at 9 p.m. on the Friday before Christmas he e-mailed reporters from his personal account saying he would put on hold planned increases in fees Fannie Mae (FNMA) and Freddie Mac (FMCC) charge for insuring mortgage securities. With a three-sentence message, he signaled a break from his predecessor and hinted at how he’ll shape the future of the two firms that guarantee about 60 percent of new U.S. mortgages.

Watt, whose first day on the job was Jan. 6, is regarded by consumer advocates as a potential champion for troubled homeowners and by bond managers as a possible threat to the value of their investments. The chief of the FHFA, Fannie and Freddie’s regulator, has been circumspect as to his intentions. Watt “is really a bit of an enigma,” says Mortgage Bankers Association President David Stevens. “You don’t know exactly where he’s going to head.” …

… Watt’s December e-mail pleased mortgage bankers and others in the housing industry who had complained that the hikes that were to go into effect in March and April were too steep and too sudden. The move appears to run counter to DeMarco’s efforts to curb Fannie and Freddie’s role in the housing market by creating incentives for other firms to compete for the business. Peter Wallison, a senior fellow at the American Enterprise Institute, says he’s not surprised by Watt’s decision. “That is certainly along the lines of what I expect Mel to do,” says Wallison, a frequent critic of government housing policies, “to follow the guidance he’s getting from people on the left and government-housing complex about what FHFA should be doing.”

Wallison has presented valuable analysis of the problems plaguing federal housing policy.

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