New Federal Housing Finance Agency (FHFA) director Mel Watt didn’t waste any time signaling that he intends to take the organization in a different direction than his predecessor Edward DeMarco. Mel Watt recently sent an email to reporters telling them that he has put a hold on plans to increase rates for insuring mortgage securities, report Jody Shenn and Clea Benson for Bloomberg Businessweek.
Rate hikes were intended to make Fannie, Freddie less competitive
While both parties eventually want to either get rid of or replace Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) in order to get the federal government out of the secondary mortgage market, figuring out the details is no simple matter, and for now Mel Watt has a lot of discretion over how the two government sponsored enterprises (GSEs) interact with the market. The plan to increase rates would have made Fannie and Freddie less competitive, giving banks more incentive to look for private sources of mortgage insurance.