Senate Republicans on Thursday blocked the confirmation of Mel Watt as director of the Federal Housing Finance Agency (FHFA), thus delivering a blow to President Barack Obama's efforts to install his own nominee as regulator of government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac.
Following the 57-41 vote, Senate Majority Leader Harry Reid, D-Nev., vowed that he would try again to find the additional votes needed to get Watt into the seat now held by FHFA Acting Director Edward DeMarco – but as of Friday, it was unknown whether Watt would continue to seek the nomination.
Watt, a North Carolina Democrat, needed only seven Republican votes in order to get the 60 needed to win the confirmation. All but two Republicans voted down his confirmation.
Republicans had previously cited concerns over Watt's qualifications for the job, which is viewed as critical to the future housing finance reform, as it will likely include the development of a concrete plan to take the GSEs out of government conservatorship.
Democrats do have the option of bringing Watt's confirmation to the Senate floor again – however, the chances of it gaining support from additional Republicans seem remote.
In a press briefing following the vote, White House Press Secretary Jay Carney said the Obama administration is ‘absolutely not’ giving up on Watt's nomination.
Vice President Joe Biden, who attended the Senate vote, reportedly called the defeat a ‘gigantic disappointment.’
One of the main concerns among Republicans is Watt's inclination to support principal reductions for homeowners who are underwater on their agency-backed mortgages. Such a measure, they assert, could harm taxpayers who backstop the mortgage insurance provided through the Federal Housing Administration, as well as the investors who hold the mortgage bonds.
Investors that own mortgage-backed securities – many of them pension funds – in recent months have been urging their representatives in Washington to not go the mass-forgiveness route.
DeMarco, who is the Republicans' preferred choice to head the FHFA, has expressed opposition to the concept of offering forbearance to underwater homeowners.
Meanwhile, home prices have risen considerably in recent months, bringing many homeowners who were previously underwater on their mortgages into positive equity. As a result, the national foreclosure rate has dropped nearly 39% since September 2012.