During a Wednesday hearing, senators grilled Mel Watt on action he's taken since being appointed as director of the Federal Housing Finance Agency less than a year ago, and his plans for the future.
The Senate Committee on Banking, Housing and Urban Affairs called on Watt to discuss housing finance during the hearing on Capitol Hill.
U.S. Sen. Tim Johnson (D-S.D.) called the hearing and applauded the efforts of FHFA for trying to bring the government-sponsored enterprises (GSEs) to stabilization. However, Johnson noted the unrest in Washington, D.C. as a problem for the fate of Fannie Mae and Freddie Mac.
“FHFA continues to perform the dual role of both regulating and running the businesses of the largest entities in the mortgage market,” he said, according to his prepared statement. “This is not sustainable, and there is no consensus in Congress regarding how to move forward.”
But when asked, Watt avoided talking about the possibility of eliminating the GSEs.
"It is Congress’ role to tell us what the future of GSE reform is and we have cooperated fully in terms of being a resource to the committees, all proposals in both the House and the Senate,” he said. “But if the committee is expecting me to have a position on what the future of housing GSE reform should be, they will be sorely disappointed.”
Watt outlined his goals for the GSEs, which include continuing the efforts to repair the housing market, reduce taxpayer risk and building a new securitization plan for the single-family side of the market.
The question and answer portion of the hearing got heated as senators asked for specific answers about timeliness for action and when they will see results.
Sen. Elizabeth Warren (D-Mass.) initiated a verbal boxing match as she scolded Watt for not directing Fannie Mae or Freddie Mac to make principal reductions for at-risk loans.
Warren noted that about 5.3 million homeowners are “underwater on their homes.”
Watt shot back, referencing how the Neighborhood Stabilization Initiative is working to help homeowners who are behind on their mortgages.
“If we facilitate the transfer of loans to other entities that allow principal reduction, that is principal reduction,” he said.
Warren continued the dispute by asking Watt how many families have been directly helped through FHFA’s efforts. Watt refused to engage.
“We have to do this in a way that is responsible,” he said. “Otherwise, we just reduce principal for everybody across the board.”
Meanwhile, Sen. Dean Heller (R-Nev.) again urged Watt to take a stance on housing finance reform.
“I don’t want to have a negative outcome as a result of something that I say,” Watt said.