By Margaret Chadbourn
Congressman Mel Watt, the incoming director of the Federal Housing Finance Agency, said he plans to delay the increase in fees on government-backed loans that the agency announced this month. The North Carolina Democrat was nominated by President Barack Obama in May and confirmed on Dec. 10 by the Senate to head the agency that oversees Fannie Mae and Freddie Mac.
Watt (pictured above) said in an email late on Friday he expected to be sworn into office on Jan. 6. He replaces Edward DeMarco, a career civil servant who has led the FHFA in an acting capacity since 2009.
"Upon being sworn in ... I intend to announce that the FHFA will delay implementation" of the mortgage-fee increases "until such time as I have had the opportunity to evaluate fully the rationale for the plan and the plan's impact," Watt said. Fannie Mae and Freddie Mac, the two taxpayer-owned mortgage finance companies, are set to increase their guarantee fees in 2014. Such fees are typically passed along to borrowers, resulting in higher mortgage rates.
The FHFA signaled it would raise the fees in the days leading up to Watt's Senate confirmation vote. The move to reduce Fannie Mae and Freddie Mac's footprint in the mortgage market by raising prices was part of DeMarco's plans to gradually shrink the companies' operations.
A spokesman for the FHFA was unavailable for comment outside of normal business hours.
Fannie Mae and Freddie Mac buy mortgages from lenders, which they either keep on their books or bundle into securities that they offer to investors with a guarantee. They do not make loans, but provide liquidity to the mortgage market by taking mortgages off the books of lenders, freeing them to make more loans. The companies currently back more than half of all U.S. home mortgages and are sweeping their profits from the housing recovery to the U.S. Treasury.
Taxpayers have propped up Fannie and Freddie to the tune of $187.5 billion in bailout funds since they were seized by the government in 2008, but they have paid $185.2 billion to the Treasury in dividends for that support.
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