There are two pieces of mortgage application index news today. And both are bad.
First, Mel Watt (D-NC) was confirmed by the U.S. Senate as the new FHFA Director by a vote of 57-41. Only two Vichy Republicans, Bob Portman (VR-OH) and Richard Burr (VR-NC) voted for the confirmation of Mel Watt, a person with no regulatory experience and an affordable housing hawk. Watt will now be the “regulator” for Fannie Mae and Freddie Mac, the mortgage giants in conservatorship with the FHFA.
Why would President Obama nominate someone (and the Democrats confirm) with NO regulatory experience for perhaps the most important regulatory job in the world? After all, the liabilities for the GSEs is almost as large as the Federal debt. And was larger than Federal debt during the housing bubble of the last decade.
Ed DeMarco, the acting Director of FHFA, stood for safety and soundness of Fannie Mae and Freddie Mac. Not only did President Obama not push for him to be appointed permanent director, President Obama wanted Mel Watt, the anti-safety and soundness choice. Watt is likely to push for HARP expansion and perhaps mortgage writedowns at Fannie and Freddie’s (aka, TAXPAYER) expense.
Second, the Mortgage Bankers Association (MBA) released their weekly survey of mortgage applications. They rose slightly from the previous week.
Mortgage purchase applications rose 37% NSA rom the previous week, filling a hole in the downward trend.
Over the longer time frame, mortgage purchase applications SA remain at 1995 levels.
Mortgage refinancing applications rose 2% SA from the previous week. This is the area where Mel Watt will try to influence by expanding HARP.
Of course, purchase applications are stalled primarily due to the long-term decline in real median household income since 2000.
As a consequence, Mel Watt may have trouble succeeding in his agenda since there is a bad income trend for the bottom 60% of the population.
I think Mel Watt’s appointment has killed any chance of housing finance reform, unless it is to strengthen the government’s role in housing.