WASHINGTON — If you want to predict the future for the mortgage giants Fannie Mae and Freddie Mac, you need to first start with who President Trump will nominate to serve as the next head of the Federal Housing Finance Agency.
The next director of the FHFA is still a mystery, but whoever succeeds current Director Mel Watt once his term ends in January will have a front-and-center role in efforts to reform the government-sponsored enterprises.
That person’s policy background and philosophy will be crucial, both in terms of how the FHFA implements any congressional reforms, or uses administrative power to make changes in the absence of legislation. Key areas include whether the status quo around the GSEs continues, how they or their conservatorships are wound down, and what housing finance vehicle would emerge in a future scenario without the two companies.
“The FHFA director individually has so much power, and because that individual has so much power, it is important to watch who gets confirmed,” said Ed Mills, a policy analyst at Raymond James. “If you want to know what GSE reform is going to look like, we first need to know who the FHFA director will be."
To get a nominee in place before Watt leaves, the administration would have to act fast as the confirmation process can drag out for months. But the administration could also allow one of Watt's lieutenants to become acting director, or appoint a temporary director under the Federal Vacancies Reform Act, if it wanted to play for more time. Winning Democratic support for any FHFA nominee will be tough, observers said, which could delay the confirmation process.
“I think that it’s difficult to imagine Democrats will move quickly on any nomination, especially if it is someone who is more ideologically bent towards narrowing the footprint of the GSEs,” said Isaac Boltansky, financial policy analyst at Compass Point.
While it is still unclear who the administration is eyeing for the job, here is a list of potential successors mentioned for the role:
